"The world will soon wake up to the reality that everyone
is broke and can collect nothing from the bankrupt, who are owed
unlimited amounts by the insolvent, who are attempting to make late
payments on a bank holiday in the wrong country, with an unacceptable
currency, against defaulted collateral, of which nobody is sure
who holds title." ~ Anonymous (too true)

"Anything Ben Bernanke says, just do the opposite!"
~ Jim Rogers

"I rather fear these political forces will push it into
a recession. In my opinion, the country could actually absorb some
more debt in order to get the economy going." ~ George
Soros (ponzi prince)

"Jim Sinclair said, 'THE MADNESS WILL NOT STOP. THE SITUATION
IS OVER THE EDGE. THE DAMAGE IS DONE. HYPER-INFLATION IS ASSURED.'
I am afraid Jim is right. Governments could have prevented it,
but did not want to pay the price. Fiat currencies will pay the
price. The US dollar will both waterfall and lose its reserve currency
status, which in turn will ignite rampant inflation." ~
Jim Sinclair, followed by Harry Schultz

"We now have an economy in which five banks control over
50% of the entire banking industry, hold a greater share of the
nation's wealth than any time since 1930. This sort of concentration
of wealth [is way out of balance.] Four or five corporations own
most of the mainstream media, and the top 1% of families holding
such power is a classic setup for the failure of a democratic republic
and the stifling of organic economic growth." ~ Jesse (more
like recipe for unbridled fraud and systemic failure)

"This is the stuff that social disorder and protest is
made of. The cheated taxpayers were forced by the US
government to bail out the dishonest banks to the tune of $billions,
without the consent of the people, and those same banks have committed
widespread fraud against the very citizens who bailed them out.
Now, the government will investigate the fraud. But Americans can
hardly trust the outcome since lobbying (basic bribery) of our politicians
by wealthy corporate America is also a widespread
practice." ~ blogger on 60Minutes website

MISCELLANEOUS MORSELS

◄$$$ THE USECONOMY IS AT HIGH RISK OF A GREEK STYLE FINANCIAL
COLLAPSE, DESPITE ALL THE ADVANTAGES OF CONTROLLING THE GLOBAL RESERVE
CURRENCY AND ITS MONETARY SPIGOT. AT THE ROOT OF THE PROBLEM IS
MAMMOTH DEBT AND PHONY ACCOUNTING, THE HUGE GAP FOR WHICH CREATES
A RISK OF COLLAPSE FROM LOST CREDIBILITY AND INTEGRITY. THE USFED
IS SOWING SEEDS OF INFLATION AND FOREIGN RESENTMENT. THE MORAL HAZARD
OF BIG USBANK BAILOUTS HAS CAUSED SEVERE RISK OF FURTHER FINANCIAL
CRISIS. THE RESPONSE TO CRISIS HAS RAISED THE RISK OF AMPLIFIED
CRISIS. $$$

Rob Arnott believes the United States is in great danger of a Greek style
collapse. At Research Affiliates he manages $75 billion in assets.
He gives an grave warning. He said, "I think the US
is playing Russian roulette the same way the Greeks were. We are
using phony accounting just as they were using phony accounting.
The GAP accounting, if it was applied to the US
government, would have shown our deficit in 2009 not at 10% of GDP,
but at 18%. The 18% of GDP [is arrived at] if you factor in new
unfunded social security and medicare obligations, if you factor
in GSEs, if you factor in the off-balance sheet spending that does
not appear on the balance sheet. If you factor all of these in,
we spent 18% more than we produced as a nation in 2009. Well, that
is horrific. And so is it worse than Greece before they hit the wall. Under correct
accounting it is worse. Bernanke has been on record as saying, 'LOOK,
THE STOCK MARKET IS UP, PEOPLE ARE OUT SPENDING, AND THEREFORE THIS
IS WORKING.' What he adamantly denies is that it ripples beyond
stocks. But it is ridiculous that the cascading effect would
stop at the convenient point of equities before it reaches the inconvenient
point of commodities. Of course it is affecting commodity prices
all over the world, and of course that is creating some geopolitical
instability. So is the Fed sewing seeds of dissension in parts of
the world where the consumption basket is mostly commodities? Yeah
of course it is. The Fed will not acknowledge it but it is true.
If too big to fail, [the big banks have been allowed to] roll the
dice and play the moral hazard game of heads I win multi-billion
dollar bonus pools, tails the taxpayer takes multi-hundred billion
dollar hits. That is wrong. We looking at a situation where we have
allowed moral hazard to create a financial crisis and the response
to that financial crisis is to allow the moral hazard issues to
become more severe than ever. So I do view the current situation
as fraught with a certain measure of risk."

Contrast the tempered warning with surprisingly vacant and cavalier
comments by Doug Noland of the Prudent Bear. He is smarter than
this. Noland wrote, "Yet, markets will most likely three
months from today be operating without additional Fed liquidity
injections. As policymakers had hoped, QE2 provided a powerful jolt.
Continued massive issuance of Treasury debt has been accommodated;
equity prices have surged; confidence has been boosted; corporate
debt issuance has boomed; leveraged lending has been fully revived;
an M&A boom has been unleashed; the hedge fund industry has
more than recovered; intensive animal spirits have been enlivened
throughout, and some private sector jobs have returned." One
can accuse Noland of turning dumb from USFed cocktails. Confidence
among the public is depressed. Private sector jobs are eroding quickly.
Everything positive is queer from inflation fever spawned by the
USFed heavy liquidity, as known as hyper-inflation. The USFed
liquidity from continued QE will be around as engrained policy for
years, when the jobs and sentiment turn sick & ugly. USTreasury
debt is accommodated without foreign participation at auction anymore.
Equity stock prices are lifted from constant USGovt intervention.
Big bank lending remains fully stalled. The puffed hedge fund mesomorph
sector lives off the anti-USDollar trade, which depends upon the
QE itself. Private sector jobs are a myth, which will be made clear
by September. This is shocking from Noland, formerly a solid analyst.
See the Safe Haven article (CLICK HERE).

◄$$$ THE MAJORITY OF U.S. REGISTERED CORPORATIONS PAY LITTLE OR NO
INCOME TAX. THEY ARE TRAINED WELL TO USE THE RULES OF THE GAME,
EVEN TO HELP PAY FOR RULE CHANGES. THE FASCIST BUSINESS MODEL IS
AT WORK. LOBBYIST DONATIONS ENABLE SIGNIFICANT CRAFTING OF LAWS
IN A SORDID LOOP OF INFLUENCE PEDDLING. $$$

A shocking two thirds of US corporations pay zero federal income
taxes. A new campaign called the Uncut Movement is pushing to
bring tax reform and forced tax payment. Over a week ago, from coast
to coast, more than forty cities joined in a day of action protesting
the tax avoidance of very large corporations. The nation's citizens
are stuck to pay taxes, but most corporations do not, as they peddle
heavy influence on the USGovt policy itself. While big corporations
are pointed to as the main source of the country's deficit, the
bigger factors are clearly endless war (whether cold or hot) and
bad economic policy. Bank of America has not paid a red cent
in federal income taxes for the past two years, while benefiting
from an additional $1 billion in tax benefits. It is more like largesse
and payola, from a return on lobbyist investment. Renewed bank profits
have flowed after the grant of $45 billion in aid from taxpayers.
Never lose sight of the fact that in 2010, Bank of America handed
out $2.2 million in campaign contributions to Congressional representatives
and political action committees (36% to Democrats, 64% to Republicans).
They help craft legislation that permits them to escape paying taxes.
Many Congressional hacks live off such donations from the powerful
banking lobby, the biggest except perhaps for the defense contractor
lobby. The resentment grows even as mortgage foreclosure evictions
continue without proper contract documentation. See the Alternet
article (CLICK HERE)
or the Daily Bail article (CLICK HERE).

By the way, the same bank lobby group influenced the Financial
Regulatory Bill that granted wider deeper powers to the criminal
bank sector on Wall Street. In my view, reform is not possible.
So systemic failure comes. The corporate tax system devised by the
USCongress is a patchwork crafted by whores with secretive clients.
The Senators gather to protect their turf corporations. See Cornyn
of Texas, who sponsored
oil & gas tax breaks. See Grassley of Iowa, who sponsored ethanol
tax breaks. See Menendez of New Jersey, who sponsored pharmaceutical
firm tax breaks. See Stabenow of Michigan, who sponsored hybrid
car tax breaks. See Wyden of Oregon, who sponsored internet tax
moratorium (Intel Silicon Forest).
The Fascist Business Model has a sub-model of corporate favoritism.
With profits, they have purchased the USCongress and turned it into
a policy tool that is constantly in apologetic mode.

◄$$$ DIMON OF JPMORGAN BELIEVES 100 MUNICIPALITIES WILL SUFFER
A DEBT COLLAPSE IN THE UNITED STATES. SO MEREDITH WHITNEY MIGHT
BE PROVED CORRECT. DIMON BELIEVES IT IS JUST PART OF A CREDIT CYCLE.
NOT SO, RATHER PART OF A COLLAPSE, PRECISELY AS WHITNEY WARNED A
FEW MONTHS AGO. CURSE THE MESSENGER UNLESS HE COMES FROM THE WALL STREET PRIESTHOOD. $$$

JPMorgan Chase CEO Jamie Dimon believes many municipalities will
need to renegotiate debt. Dimon anticipates that at least a hundred
municipalities will not survive and will default on their debt.
Rest easy, because he urges not to panic. To a US Chamber of Commerce
event in WashingtonDC, he said, "You are going to see some
municipalities not make it. I do not think it is going to shatter
America.
I just think it is a part of the credit cycle." What a
stupid rejoinder forecast to a reasonable debt bust call. So the
Lehman Brother failure, the Fannie Mae adoption, and the AIG inclusion
was also normal credit cycle stuff too, along with ongoing big USbank
welfare, even their ongoing black hole costs. What a corrupt arrogant
megalomaniac! The speculation about widespread municipal bond
defaults intensified last December when bank analyst Meredith Whitney
predicted that hundreds of $billions in municipal bonds would default
in 2011 amid pressure to balance budgets. She was pilloried
for her expressed viewpoint, but here Dimon as a high priest delivers
the same message. Whitney gave the message in dire tones as part
of a debt collapse scenario. Dimon assures it is just credit cycle
as usual. Watch the tip of the iceberg be exposed higher and higher,
and the muni problem to worsen by an order of magnitude in the coming
12 to 24 months. See the Bloomberg article (CLICK HERE).
Bear in mind that the US
press is attempting to portray Dimon as some kind of folk hero in
bizarre fashion. Dimon has also publicly stated his reluctance to
participate in the bank realignments and to accept bank aid, a total
distortion. Dimon is an upper echelon leader at the helm of the
financial crime syndicate in power.

◄$$$ AMERICANS FACE A PERSONAL WEALTH TRAGEDY MOVING TO THE
NEXT STAGE. WITH HOME EQUITY DOWN HARD, AND PENSIONS OFTEN WIPED
OUT, THEIR REMAINING SAVINGS WILL NOT GO FAR AS PRICE INFLATION
RAVAGES THE USECONOMY. JOB SECURITY IS WANING BADLY. POWERFUL CORROSIVE
INFLATION IS COMING, THE RESULT OF MULTIPLE FACTORS IN CONVERGENCE
$$$

A great many warning signs of imminent hyper-inflation have been
posted in view. Most Americans fail to properly recognize them,
either from ignorance or belief of deflation warnings. The Natl
Inflation Assn believes a serious risk of hyper-inflation could
break out by the second half of 2011, a point the Jackass is in
full agreement. They believe hyper-inflation is almost guaranteed
to occur by the end of this decade. They wrote, "In our
estimation, the most likely time frame for a full-fledged outbreak
of hyper-inflation is between the years 2013 and 2015. Americans
who wait until 2013 to prepare, will most likely see the majority
of their purchasing power wiped out. It is essential that all Americans
begin preparing for hyper-inflation immediately." The NIA
identified the top 12 warning signs in impressive detail. See the
National Inflation Assn website article (CLICK HERE) and the Activist
Post article (CLICK HERE).

1)The Federal Reserve is Buying 70% of USTreasurys.
In recent months, foreign central bank purchase volumes have declined
from 50% down to 30%, and USFed purchases have increased from 10%
up to 70%. Foreigners have almost declared a boycott. No more debt
export means higher domestic price inflation.

2)The Private Sector Has Stopped Purchasing USTreasurys.
The US private sector previously
bought 30% of USGovt bonds sold. Today, they are actually net sellers
in volume of that debt. The PIMCO flagship fund went from the single
largest private sector owner of USGovt bonds to zero total holdings.
The safe haven has transformed from USTreasurys to Gold.

3)China
Moving Away from USDollar as Reserve Currency. The USDollar
is no longer backed by gold and China has become the world's
largest manufacturing base. Global trade settlement in USDollar
terms will naturally go away. The Chinese Yuan is moving toward
reserve status.

4)Japan
Has Begun Dumping USTreasurys. With a peak of $886 billion in
US$-based reserves, the once reliable Japan has begun to go into
reverse. They must spend $300 billion over the next year to rebuild
parts of their country that were destroyed by the recent earthquake,
tsunami, and nuclear disaster.

5)The Fed Funds Rate Remains Near Zero. The
USFed has been stuck near 0% since December 2008. A flood of excess
liquidity has resulted, which continues, even amplifies. The USEconomy
should currently be in an extremely deep recession, except for the
USFed money printing. NIA believes gold, and especially silver,
are much better hedges against inflation. (Actually it is in deep
recession, disguised by rampant price inflation, much of which is
relabeled as growth.)

6)The Rate of Annual CPI Growth Has Almost Doubled
in Three Months. That is the corrupted Bureau of Labor Statistics
consumer price index. The true CPI rate is close to 10% right here,
right now. Even if the BLS manages to artificially hold the CPI
down around 5% or 6%, NIA believes the real rate of price inflation
will still rise into the double digits within the next year.

7)Mainstream Media Denies the Fed Inflation Target
Is Surpassed. The Fed has an informal inflation target of 1.5%
to 2.0%. Focus has shifted more to the core CPI, that meaningless
figure which excludes the raging food & energy price increases.

8)Record USGovt Budget Deficit in February of $222.5
Billion. The February federal deficit was more than the entire
fiscal year of 2007. In fact, the monthly deficit on an annualized
basis comes to a whopping $2.67 trillion. NIA believes this is a
preview of future budget deficits. (The Jackass forecast is for
a $2.0 trillion deficit next year.)

9)High Budget Deficit as Percentage of Total
Spending. The projected USGovt budget deficit for fiscal year
2011 is $1.645 trillion.That figure is 43% of the total
$3.819 trillion in projected total federal spending in 2011.
Check out Brazil
in 1993, whose budget deficit as a percentage of expenditures was
the same proportion immediately before they suffered hyper-inflation.

10)Obama Deceived On Foreign Policy. Barack Obama campaigned
as an anti-war President, making numerous promises. None were kept.
War spending keeps the federal deficits high. The United States spends $1 billion per day on war,
and $1 trillion annually on military expenses.

11)Obama Changed the Definition of Balanced Budget. The Admin
admits that no balanced budget is possible until year 2015, and
the budget deficits could keep rising until the year 2021. Obama
actually has set as a goal to balance the budget, excluding interest
payments on the debt, by 2015. Obama is implicitly redefining a
balanced budget to exclude interest payments.

12)Expect Interest Payment Increases. With US inflation beginning
to spiral upward, the NIA expects to see upward moves in long-term
bond yields. Within the next two years, the NIA believes the Federal
Reserve will be forced to raise the Fed Funds Rate in a last-ditch
effort to prevent hyper-inflation. When both short and long-term
interest rates rise, the impact from interest payments on our national
debt will become acute. Interest payments on the federal debt could
reach $500 billion within the next two years, even higher later
on. (The Jackass disagrees, in that long-term rates will remain
low from constant bond market intervention.)

THE PRIVILEGED PROTECTED BANKS

◄$$$ THE USFED RELEASED THOUSANDS OF PAGES OF RECORDS FROM
ITS T.A.R.P. DISBURSEMENT AND DISCOUNT WINDOW ACTIVITY. THE DOCUMENT
RELEASE HAS EXPOSED THE BIG USBANKS ARE LIARS AND THIEVES, AND SHOWS
THAT SUPPORT OF FOREIGN FINANCIAL FIRMS HAS BEEN PREVALENT. THE
USFED SPECULATED AND AIDED THEIR FELLOW SYNDICATE BANKS IN DEEP
TROUBLE. THE USFED ACCEPTED ROTTEN BONDS AS COLLATERAL, AN ILLEGAL
MOVE. THEY ALSO ACCEPTED STOCK EQUITY AS COLLATERAL, ALSO ILLEGAL.
$$$

Finally, with great anticipation justifiably, thousands of pages
of USFed documents have been released on activity at their loan
window. The revelations are scummy. The details pertain to the USFed
and the Clearinghouse Assn, where the Primary Dealers do much of
their work in the basement. Under court order, the paper flood
came almost three years after Bloomberg LP first requested details
of the central bank hidden grandiose support to big banks across
the world during the financial crisis. The records reveal the
names of financial institutions that borrowed directly from the
central bank through the so-called Discount Window. The USFed was
cornered from lost appeals before the US Supreme Court. The Jackass
thought the high court would side with the USFed, glad to be wrong.
The public interest is finally served. The central bank provided
the documents after months of attempts to shield them from public
view. It has argued the need to keep their records of activity secret,
like any crime syndicate would. Precedent was set. The central
bank has never revealed identities of borrowers since the Discount
Window began lending in 1914, almost a full century. Bowing
to the banking lobby, the Dodd-Frank financial regulatory bill exempted
the facility last year when it required the USFed to release details
of emergency programs that extended $3.3 trillion to financial institutions
to stem the credit crisis. That is like requiring details on checks
sent without looking at the checking account full monthly statements,
absurd!

Objections from the syndicate fortress came from Donald Kohn, former
USFed vice chairman and senior fellow at the Brookings Institution.
He sold his soul long ago. He dutifully said, "I am concerned
that in the next crisis, it will be more difficult for the Federal
Reserve to play the traditional role of lender of last resort. Having
these names made public, or the threat of having them made public,
could well impair the efficacy of a key central bank function in
a crisis, to provide liquidity to avoid fire sales of assets, because
banks will be reluctant to borrow." Instead, the records
will show corruption on its face, and prove the big US
banks liars. The records will also slow basic improper lending.
The USFed has steadily argued that its lending records should not
be subject to the Freedom of Information Act, because revealing
which banks were tapping the Discount Window might attach a stigma
to those banks and stir depositor runs or roil markets. What a crock!
That is what free markets are for, to remove valuations from dead
financial entities, especially the homes of profound fraud. Their
position is a billboard marquee label on the Fascist Business Model
itself. See the Zero Hedge article (CLICK HERE).

Charles Young is a spokesman for the Govt Accountability Office.
He pointed out how the Dodd-Frank Act gives the agency authority
to audit operational integrity of the Discount Window and controls
prospectively only. Arthur Wilmarth is a professor at George Washington University
Law School. He
made an insightful observation, when he said "Solvency
is the big issue. Was the Fed keeping banks alive when they should
have died?It is surprising that the Congress did not say they wanted
the GAO to confirm that Discount Window borrowers were solvent."
In other words, the USFed is in the practice of serving
the dead if not corrupt banks, entirely contary to their charter.
See the Bloomberg article (CLICK HERE).

Focus on the big US banks, the center of the financial crime syndicate
that has wrested control of the USGovt finance ministry and related
appendages in totality. The large banks claimed over two years
ago not to need any of these aid programs, surely not to require
them for any bout with survival, implying they did not use the Discount
Window. Yet the records show a curious mixture of large banks
that actually did use these programs, including heavy money grabs
by JPMorgan in the Asset Backed Commercial Program. Harken back
to a Goldman Sachs statement, made under oath in front of the Financial
Crisis Inquiry Commission. They said, "We used it one night
at the request of the Fed to make sure our systems were linked with
their systems, and it was for a de minimis amount of money."
Peter Wallison, a member of the FCIC, queried further, "You
never had to use it after that?" Cohn of GSax replied,
"No, and as I said, we used it on the Fed's request."
The data says otherwise, to the contrary. Goldman Sachs in fact
hit the Discount Window five times, not once. That was a false
statement under oath, called perjury. Dexia, a large conglomerate
and Franco-Belgian firm, hit the window several times. Not just
the frequent appeal to the window is of material importance. The
USFed apparently accepted more than $100 billion in defaulted bonds
and stocks as supposed collateral, which is not permitted in their
charter. The letter of the law requires that all lending be
fully collateralized. The transformed USFed mandate from practicality,
as in maintaining the public confidence in their retirement and
savings investments, has no legal basis. They are not charged with
supporting the stock market. Some analysts call it the Fourth Mandate.
It is abundantly clear that the USFed was breaking the law that
strictly requires sufficient collateralization produced for all
loans made, every loan remaining fully secured. The USFed is directly
prohibited from taking market risk in its lending, as in speculating
that a big bank's rotten assets will be made good after a year of
inflation support. Other violations came in the form of aiding banks
in the Middle East and North Africa, banks whose nations are banned from US commercial participation.

The law is clear on loans and collateral. At the time Section 13.3
read: "That before discounting any such note, draft, or
bill of exchange for an individual, partnership, or corporation,
the Federal reserve bank shall obtain evidence that such individual,
partnership, or corporation is unable to secure adequate credit
accommodations from other banking institutions. All such discounts
for individuals, partnerships, or corporations shall be subject
to such limitations, restrictions, and regulations as the Board
of Governors of the Federal Reserve System may prescribe."
Common stocks and defaulted bonds are not, by any reasonable definition,
secured collateral. See the Market Ticker article (CLICK HERE).

◄$$$ THE BIG USBANKS CONTINUE TO DOMINATE THE INDUSTRY, DESPITE
THEIR INSOLVENT CRIPPLED CONDITION. THE LARGEST FIVE BANKS OWN 63%
OF THE NATION'S MORTGAGES. THE TOO BIG TO FAIL MANTRA IS A LICENSE
TO DEFRAUD AND A BLANK CHECK TO HAVE GRAND LOSSES COVERED BY USGOVT
WELAFRE. THEIR STEPS TOWARD RECOVERY HAVE DEPENDED UPON HEAVY CONTROL
OF THE USGOVT ITSELF. THE NEXT LEG DOWN IN HOUSING PRICES WILL RESULT
IN FURTHER RUIN AND ANOTHER FORMAL REQUEST FOR BAILOUT. $$$

After a veritable death experience in late 2008, the Wall Street
banks have managed, despite being zombie organizations, to amass
considerable profits in 2009 and 2010. The bank profits have
totaled nearly $80 billion, but they came during unspeakable growing
balance sheet coincident insolvency. They were broke on the
books, but have been permitted to continue with USTreasury carry
trade and USGovt welfare programs. They borrow at the short end
cheaply, and invest at the long end to earn a profit, thus helping
to keep rates down. Wall Street employees all through the ranks
have been on the receiving end of $43 billion in bonuses over the
two year period. Their steps toward recovery and revitalization
have directly resulted from control of politicians and regulators,
and access to money printing apparatus. They could not have made
progress without undue and corrupt influence of the Financial Accounting
Standards Board, the Securities & Exchange Commission, the Internal
Revenue Service, the Federal Deposit Insurance Corp, and the USCongress,
along with numerous USGovt agencies and the subservient lapdog US presss networks. The FASB
suspended mark to market asset valuation on the balance sheet, plain
& simple. The master plan has funneled hundreds of $billions
from taxpayers to the banks that were responsible and liable for
the greatest financial collapse in world history, laced with bond
fraud.

The bankruptcy laws were averted as the Too Big To Fail mantra
was invoked into policy. The criminally negligent Wall Street banks
could have been liquidated in an orderly bankruptcy. Doing so would
have set off an enormous avalanche of credit derivative accidents,
the impact for which is uncertain even to the most trained, aware,
and savvy analysts. It also would have rendered the big US
banks as legless powerless agents to prevent their control of the
USGovt. Some believe the nation could have achieved balance. Instead
to the contrary, my firm belief is that the nation would have been
sent to a wasteland much like a nuclear blast would level a region,
from a chain reaction of derivative explosions. That is not
to say liquidation should be averted. My view is that liquidation
is the first essential step to true recovery, during which the credit
derivatives should be fully revealed and treated, perhaps even nullified
in many respects. Let the big US banks deal with the contract dissolution
issues from their Shadow Banking syndicate activity.

The current banker welfare plan continues unabated. They exploit
the USTreasury carry trade, borrowing at the 0% discount rate and
earning a risk-free 2% or 4% return. The loosened tax rules on restructured
commercial loans helped also. By October 2010, in the absence
of success to restore health to the big US
banks, the QE1 program gave way to the QE2 program. The Bernanke
Fed expanded their balance sheet to $2.6 trillion by injecting $3.5
billion per day into the stock market, and by purchasing over $100
billion per month in USTreasury Bonds. The USFed took $1.3 trillion
of bad loans off their books, while the value of their remaining
loans has been overstated by 40%. The USFed is guilty of phony
accounting too. The big US
banks transformed into speculators, not lenders, turning a deaf
ear to Main Street credit requests. The USFed
has increased the monetary base by $500 billion in just the last
three months in a desperate attempt to keep a floundering USEconomy
limping along, at the grand cost of lifting all commodity prices
based in USDollar denomination. The graphs show the cyclone
of new monetary creation recently. The world has reacted with hostility
and revolt. The next bailout request will not be so easy with the
current USCongress, which is locked in the budget debate and faces
a USGovt shutdown.

The big four of JPMorgan, Citigroup, Bank of America, and Wells
Fargo continue to function as zombie banks pretending to be healthy,
beneficiary of special welfare treatment. They reported profits
of $34.4 billion in 2010. They take liberties with regulatory requirements
too. Neither Citicorp nor Bank of America
have filed their 10K reports after three months, a telling fact.
The former giant bank is the main handler of CIA project funds and
retirement funds. The latter giant bank is the core processor for
money laundering of the military narcotics funds. These four
Too Big To Fail bastions of crooked banking and crony capitalism
have $340 billion of commercial real estate loans on their books.
They are broadly the object of extension of loan provisions beyond
the contract limits, as the value on the bank books is pretended
to be higher than reality. The industry calls it Extend & Pretend,
in the empty hope that in the near future the loans will be restored.
These four banks have $1.1 trillion of outstanding mortgage debt
on their books. Imagine the next phase, and the impact of a
further 20% decline in home prices to their balance sheets from
heavy loss writedowns. They are already insolvent, and the next
punch down will render even greater damage and require even greater
gymnastics to sustain the system. The USCongress will not be willing
or able to help. These biggest banks own 63% of the mortgage
market, incredibly. They do almost what they please, are immune
to prosecution, and will seek another bailout sooner rather than
later. The aid they demand and receive will be hidden from view
from slush fund sources. The hidden effect is higher costs to the
entire USEconomy without benefit of higher wages, an elite tax systemically.
Hat tip to Barry Ritholz for the story.

◄$$$ ECONOMISTS LOVE THE BANKING CARTEL SINCE IT SERVES AS
PROTECTOR & PROVIDER, AND ENFORCES MONOPOLY RULES. COMPETITION
IS NOT THE DOMINANT THEME IN THE BANKING SYSTEM. THE CARTEL FUNDS,
RECRUITS, AND SUSTAINS THE SYSTEM THROUGH TIGHT SUPPORT LINKS WITHIN
THE ACADEMIC UNIVERSITIES. HOWEVER, THROUGH THE FOREVER POROUS INTERNET,
THE USFED CASTLE WALLS ARE UNDER ATTACK. $$$

Economists not only love the US Federal Reserve, they worship it
and regard it as sacred, with its policy actions sacrosanct. The
Federal Reserve System acts as the central bank of the United States, founded by
the USCongress in 1913. The actual vote took place during a holiday
period when few members were present to vote. My view is that the
Bank of England and the powerful London
bankers waited 137 years to take back control of the colonies, but
by secret moves disguised as performing a vital function. The
Londoners established a banking cartel. The economics of banking
must be viewed within the contextual economics of cartels. Imagine
if all newsletters had were licensed and regulated. They would be
totally corrupt in twelve months.

All modern banking systems are based on government licensing
& regulation

All licensing & regulation systems create barriers to entry

All barriers to entry created by government enable cartels

All central banks are enforcement agents of the national banking
cartel.

No chapter on central banking in any introductory or upper division
economics textbook published by a mainstream publisher used in universities
describes central banking in this light. The chapter on central
banking is typically placed apart from the chapter on money &
banking, and never cross-referenced. Such is the educational practice
since the end of World War II. This is just one of my pet peeves
regarding the educational process of modern US
economists, who are badly trained. Numerous chaired posts are
funded by the big US
banks, by the USDept Treasury, and connected think tanks with heavy
political ties. Several debates by the Jackass with PhD Economists
(even Ivy League) have revealed shocking blind spots regarding sound
money, managed inflation, debt propagation, cause of crisis, dependence
upon asset bubbles, accuracy of economic statistics, level of fraud
by Wall Street firms, and integrity of financial markets. Libraries
are stacked with modern economists tomes, but they rarely bind the
popular journals. The majority of fresh PhD Economists act like
apprentices in some medieval urban guild, as they seek a strong
income through entry into the cartel. The USFed routinely has editors
of the academic journals on its payroll.

Gary North of the Lew Rockwell Institute wrote, "Once [inside
and accepted], they do not want the guild to lose its ability to
enforce barriers to entry. To lose this power would be to face free
market competition. They have worked too hard for too long to accept
this outcome. Academics are, in the language of mainstream economics,
rent seekers. So, economists do not apply economic analysis to the
academic cartel. The Federal Reserve is untouchable inside academia.
But it is beginning to have critics outside of academia. The bust
and bailout in the fall of 2008 sent a message that finally penetrated
the information barriers imposed by Old Boy Network: THE BANKING
SYSTEM IS RIGGED TO FAVOR THE BIGGEST BANKS. This has been true
ever since 1914. The FED still has a free ride inside academia.
It does not have one on the Internet. QE2 will backfire. There will
be either price inflation or another attempted Exit Strategy. The
exit strategy failed in 2010. There is no permanent exit strategy,
other than a Great Depression II. When it comes, either before or
after hyper-inflation, the USFed Kings-X within the ranks of academia,
with its depleted pension portfolios, will finally end."

In a sense, as North points out, the US economists serve as bagmen
for the USFed itself. They carry the central bank water as errand
boys in the ideological dissemination. In a crime syndicate, a bagman
runs errands, hands out money to politicians for influence and immunity,
and shields it from both criticism and prosecution. The bold Huffington
Post in 2009 published an important article entitled "Priceless:
How the Federal Reserve Bought the Economics Profession."
From 1991 to 1994, the USFed dispensed $3 million to over 200 professors
to conduct research, a practice that continues. The Fed Board of
Governors employs 220 PhD level economists in a steady rise each
year. But the big growth in influence has come in contracts. The
US
Federal Reserve, according to its own PR staff, spent $389.2 million
in 2008 on monetary and economic policy, money spent on analysis,
research, data gathering, and studies on market structure. For
2009, a ripe $433 million is budgeted for more intellectual influence.
The cartel is a vast club with many wings. Around 500 PhD level
members of the American Economic Assn specialize in monetary matters
or public finance. In the private sector, about 600 are part of
the National Assn of Business Economists in the Financial Roundtable.
Add up the economists on the payroll and economists receiving grants,
plus those who have submitted applications or resumes, a significant
majority of the field is accounted for. The cartel is well entrenched,
but things have begun to change as the castle walls are under gradual
attack. They have enlisted the full support and co-opted the integrity
of the colleges & univesities for at least three decades. The
economics theory has been subverted to support phony money, managed
inflation, credit centrifuge, dependence upon asset bubbles, and
market intervention. The syndicate in charge of the fiat money must
protect its multi-$trillion fraud racket. So they enlist an army
of economists and bankers who have, with or without knowledge, sold
their souls to the devil. See the Lew Rockwell article (CLICK HERE).

◄$$$ THE F.D.I.C. BANK DEPOSIT INSURER HAS RAISED THE LIMIT
ON INSURED ACCOUNTS TO AN UNLIMITED AMOUNT. THE RULE CHANGE LAST
DECEMBER MIGHT SIGNAL A LARGE BANK GOING BUST SOON. THE RELAXED
RULE MEANS THE DEPOSIT INSURANCE BENEFIT WILL BE GIVEN ACROSS THE
BOARD WITHOUT THE TIME CONSUMING DECISIONS TO BE MADE. EXPECT BIG
BANK RUNS, FOR WHICH THE F.D.I.C. WILL BE READY. $$$

An important notice took place at the end of 2010. The Federal
Deposit Insurance Corp might have just signaled an intention to
go into high volume production and processing of dead banks.
The new rule, no limit on the size of deposit insured, means no
decisions must be made in what could become a heavy volume task.
And with each dead bank whose assets must be processed, the job
will be much simpler. From 31 December 2010 through 31 December
2012, all non-interest bearing transaction accounts are to be fully
insured, regardless of the balance of the account and the ownership
capacity of the funds. This coverage is available to all depositors,
including consumers, businesses, and government entities. The unlimited
coverage is totally removed from the insurance coverage provided
for a other accounts held at an FDIC-insured bank.

Technically, a non-interest bearing transaction account is a deposit
account where a) interest is neither accrued nor paid, or b) depositors
are permitted to make an unlimited number of transfers and withdrawals,
or c) the bank does not reserve the right to require advance notice
of an intended withdrawal. Neither Money Market Deposit Accounts
(MMDAs) nor Negotiable Order of Withdrawal (NOW) accounts are eligible
for this temporary unlimited insurance coverage, regardless of the
interest rate, even if no interest is paid. The FDIC will be sugar
daddy to all non-interest bearing accounts regardless of the size
of the balance. It seems the problem is the lack of organization
and staff at the FDIC needed to take over a bank with over $10 billion
in deposits. They typically must complete the liquidation work
over a weekend, in a minimal disruption directive. When the bank
is very large, they do not have enough time for the due diligence,
before making decisions on the depositors one at a time. One
might infer that the FDIC thinks it will need to take over larger
banks, and this policy change facilitates the process. Another
line of thought points to extremely large depositor accounts by
the power elite, who have demanded full insurance. The challenge
comes from the reverse gear to the fractional banking. The banks
owe $1 million to depositors for every $100k held in reserve assets.
The new FDIC rule could be in anticipation of bank runs, in addition
to big bank collapses. Expect some powerful magnificent bank
events, maybe bank runs soon. See the Economic Policy Journal article
(CLICK HERE).

◄$$$ THE F.D.I.C. HAS ITS HANDS FULL WITH DEAD AND DYING
BANKS. THE PACE CONTINUES UNABATED IN THE DEATH PROCESS, THE SAME
PACE SEEN SINCE MID-2009. THE NUMBER OF PROBLEM BANKS CONTINUES
TO GROW, BUT THEIR VOLUME OF INSURED DEPOSITS HAS LEVELED OFF. THE
USBANK SYSTEM HAS BECOME A COLLECTION LED BY ZOMBIES. $$$

The rate of bank death events in year 2011 is following the
same pace as 2010, brisk but steady, and faster than 2008. That
continued pace showed an acceleration from the pace in the first
half of 2009. Since mid-2009, a relentless killing field has been
the case. Every Friday afternoon the FDIC announces its usual fare
of bank failures, with hardly a ripple of impact from the news anymore.
Bank failures have become the norm, even passe, without hint of
panic. Just a slow trickle of failure. Despite the extraordinary
measures to maintain fraudulent accounts, and from what is known
as extending and pretending on toxic loans that will never be restored,
many more banks will die and soon. For example, the 10 major regional
banks with the highest risk from commercial real estate loans once
had $133 billion of commercial real estate loans on their books.
All remain in business. Their real estate loans are worth 30%
to 50% less than they are being carried on the books, a great distortion
of reality. A true valuation of these loans would put all 10
of these banks out of business. They are dead banks walking, grand
zombies. Over 900 banks are insolvent, fixtures on the official
FDIC Problem List. The number of banks in deep trouble continues
to grow, but their total assets under insurance has stabilized.
The federal tool liquidation firm FDIC, the Wall Street harlot has
processed 300 banks. At least $200 to $300 billion of losses
lie in the pipeline, as constipation from toxic credit assets clogs
the US
financial system. The size of the problem in full view, evident
in the graphs, makes liars of bank leaders who claim a recovery
is in progress. Total collapse is in progress in a gradual and inexorable
deterioration with massive momentum.

USTREASURY BONDS AT TIPPING POINT

◄$$$ NONSENSE ABOUT THE USFED HIKING INTEREST RATES IS INTENDED
TO SUPPORT THE BUBBLE INFESTED USTREASURY BOND. PLANTED USFED COMMENTS
SOUND ABSURD ON THEIR FACE. READ ISOLATION AND DESPERATION FROM
THE LOW VOLUME MURMURING. THEY RECOGNIZE THE INFLATION RISK, BUT
DO NOT COMPREHEND IT IS HERE & NOW, SOON TO BE SEVERE. $$$

Word comes from inside the USFed from a senior member that the
venerable syndicate helm could raise interest rates by year end,
much sooner than expected by financial markets. What a joke! And
the housing market would roll over more quickly. And the stock market
would require even more frequent intervention support action. And
the credit derivative monster would experience a lit fuse with unknown
damage in ramifications. The Jackass thinks not on a rate hike,
just like through the 2009 year the talk of an Exit Strategy was
vacant. The USFed has painted itself into a corner. It cannot
exit. It is stuck. Minneapolis Fed President Narayana Kocherlakota
signaled the Fed could raise benchmark borrowing costs, which are
now close to zero, by 75 basis points by the end of the year. He
also claims the USEconomy should grow by 3.0% this year, an unlikely
event unless all manner of price inflation is collected and relabled
as growth. He implies no detrimental effects from the termination
of the QE2 debt purchase program in June. He is delusional. Kocherlakota
is a voting member on the Fed Board this year, often considered
one of the stronger anti-inflation hawks on the panel. Some notable
stirring based upon deep discomfort can be detected by opponents
to unbridled monetary inflation as an official solution. They
wish to tighten financial conditions before an inflationary psychology
takes root. Kocherlakota noted his surprise that the QE programs
have stoked inflation expectations. He urges a hike of the target
rate by more than 50 basis points to properly realign. They are
more concerned about expectations of inflation than its reality!

Within the same vocal chorus of dissent, Richmond Fed President
Jeffrey Lacker believes the USFed should consider cutting short
its $600 billion bond buying program as the USEconomy shows signs
of improvement. He stated that every $100 billion counts without
mention of how many hidden $trillions have been printed. Lacker
has one eye set on reality. He said "At this point in the
business cycle, the risk of overshooting, of getting a bigger ratcheting
up of inflation than we want, is very real." A bit late
for worry about overshooting, like 18 months. The same sentiment
is echoed by St Louis Fed President James Bullard, who started the
dissent by suggesting the Fed's bond purchases might be cut short.
The unemployment rate stubbornly remains at an elevated 8.9%, helped
by not counting many severely unemployed, the chronic. Economists
disagree on the potential ability of monetary policy to address
the current economic stagnation. They might notice that high
powered monetary centrifuge spew does not form new businesses or
lead to new hiring, but instead the opposite. It causes the entire
cost structure to rise, squeezing the entire USEconomy. Rather,
the QE programs to buy USTBond securities with newly printed money
are designed to alleviate the pressure on extreme USGovt debt issuance,
aggravated by absent and very angry foreign creditors. See the CNBC
article (CLICK HERE).

◄$$$ USGOVT DEBT IS AT A TIPPING POINT. UNLIKELY DEBT REPAYMENT,
ESCALATING DEBT LEVEL, AND GROWING INSOLVENCY ARE GREAT THREATS.
URGES HAVE COME FOR THE USFED TO HALT ITS DEBT MONETIZATION AND
MONETARY AGGREGATE GROWTH SPIGOT. WARNINGS COME FROM INSIDE THE
USFED ITSELF, HARDLY A COHESIVE BAND IN DEFENSE OF A FORTRESS. $$$

The voting member Richard Fisher of the USFed has been vocal. One
would think the banking generals would shut him up. A sign of lack
of cohesion at the USFed fortress is the steady critique from its
lower ranking members. Dallas Fed President Fisher believes the
USGovt debt situation is at a tipping point, as tremendous damage
is imminent. He urged the US central bank to refrain
from any further stimulus measures. Although debt cutting measures
would be painful, he expected the USGovt to take the same austerity
medicine as European counterparts. He pointed to current price inflation
pressures. He believes the USFed must stop pumping out more monetized
debt. He warned of a return to dangerous speculation. He antiticipates
the exit strategy will be laid out at the appropriate time. That
is never in my opinion. He also senses the economy as moving under
its own power increasingly. So he remains a bit delusional. Economists
regard him as one of the most hawkish policymakers on the team.

Fisher spoke in two different settings, revealing much in clear
stark terms. He said, "Having done our job, I see many risks
to the Fed overstaying its welcome. Our duty is most distinctly
not to monetize the debt of fiscally imprudent government. [Doing
so] has proven to be a direct path to economic perdition.
Inflationary impulses are gaining ground in the rest of the world.
My gut tells me that this will result in some unpleasant general
price inflation numbers in the next few reporting periods. It may
well be that we should consider curtailing what remains of QE2.
Just as we pressed on in doing our duty through extraordinary, exigent
measures, we must now discipline ourselves to just as persistently
normalize our operations in a timely way."

He continued in another venue to say, "If we continue down
on the path on which the fiscal authorities put us, we will become
insolvent. The question is when. The short-term negotiations
are very important. I look at this as a tipping point. The Fed has
done enough, if not too much, and we should do no more. In my opinion
no further accommodation is necessary after June,
either by tapering off the bottom of Treasuries or by adding another
tranche of purchases outright. We are seeing speculative activity
that may be exacerbating price rises in key commodities such as
oil. The real question is when do we stop accommodation. We need
to continue to discuss the exit policy. But before you can tighten,
you have to stop accommodating. There are different views on the
impact from Japan
and the Middle East being expressed, but we
are central bankers. We have to think about the long term. It is
way too early to tell." The last comment on Japanese impact
proves he has zero perceptual capability and less forecast ability.
He needs to subscribe to the Hat Trick Letter. See the Yahoo Finance
article (CLICK HERE).

◄$$$ BILL GROSS OF PIMCO EXPECTS A USTREASURY BOND DEFAULT,
BUT IN A HIDDEN FASHION, AS IN STEALTH THEFT. PRICE INFLATION AND
DEBT DEVALUATION ARE COMING, ALONG WITH A CONSTANT ULTRA-LOW INTEREST
RATE ENVIRONMENT. NEVER LOSE SIGHT OF HOW ARTIFICIALLY LOW RATES
ARE THE SENTINEL SIGNAL FOR THE GOLD BULL MARKET, ITS ENGINE AFTER
CONTINUED LINGERING PRESENCE. GLOBAL ISOLATION COMES, AND CURRENCY
RUIN. $$$

Bill Gross is vocal, angry, and defiant. He has turned against
the bond fountain head. His PIMCO flagship fund has totally abandoned
USTreasury Bonds in its vast portfolio, a stunning gesture. He is
specific about the discredited USTreasury Bond, the debt security
for the USGovt. Gross believes that unless entitlements (welfare,
social security, medicare, government pensions) are substantially
reformed, the country will default on its debt. He does not
anticipate a default in the usual conventional way. He expects the
villain doing the theft will be the ransacking of savers. He expects
a combination of less observable devices to steal from the US population, namely inflation,
currency devaluation and low to negative real interest rates.
He reminds the debtor giant colossus that his PIMCO clients from
unions, cities, US-based and global pension funds, foundations,
even Main Street citizens, choose not to be shortchanged or to be victims
of concealed theft via strained monetary policy. He urges the USGovt
to preserve the integrity of the USTreasury market, to promote a
stable USEconomy, to reduce entitlements, to address future liabilities
in healthcare, and to contain Social Security costs. His laundry
list of high priorities has been the central area of spending failures
by the USGovt, lofty goals nonetheless. He summarized, saying in
very colorful imagery that the USCongress should hear something
like "I sit before you as a representative of a $1.2 trillion
money manager, historically bond oriented, that has been selling
Treasurys because they have little value within the context of a
$75 trillion total debt burden." He screams in his own
style how the USTBonds are rapidly going worthless. See the Zero
Hedge article (CLICK HERE).

Medicare, Medicaid and Social Security account for 44% of total
federal spending, and rising. The reckless practice of assuming
the USGovt can grow out of its onerous debt burden is utter blind
folly at best and intentional delusion at worst. The USEconomy is
stuck in a recession, protected from the official statistics but
obvious to industry and households. The implications to severe slash
of entitlements are far reaching, too painful to enact, the beneficiaries
too entrenched and vocal to defend against. The release valves for
the vast debt pressure cooker involves a combination of nasty monsters.
The US
leadership will not taken the bold action required to restore integrity
and reduce the grotesque imbalances. The global response will be
total isolation, forcing hyper-inflation and currency ruin. gross
foresees these impacts:

a declining dollar, currently happening broadly, seen in ugly
food & energy impacts

continuing to pay savers less on their money than the rising
costs.

◄$$$ THE USMONEY SUPPLY HAS GONE VERTICAL AGAIN SINCE THE
START OF 2011. THE USFED HAS TRULY HIT THE PANIC BUTTON, JUST LIKE
IN LATE 2008. TO PREVENT SPILLOVER OF SUCH STAGGERING SUMS OF MONEY
INTO THE FINANCIAL SYSTEM WILL BE IMPOSSIBLE. ONLY SMALL PORTIONS
WILL GO WHERE THE BANKERS WANT IT TO GO. THE ARBITER OF ABUSE IS
THE COMMODITY MARKET AND GOLD, WHICH RISES IN COMPENSATION TO MONETARY
HYPER-INFLATION. $$$

A picture often is worth 1000 words, here in particular with the
adjusted US
monetary base. It reveals how much money the USFed officially has
injected into the system. As footnotes, consider that several $trillion
was handed to the central bankers across the world in the months
following September 2008 as part of the hidden TARP dispensation.
Regard the chart below as the USFed hitting the panic button
from in reaction to a breakdown in the first several weeks of 2011.
The rampup of money production does not jibe with the calm confidence
that the Secretary of Inflation Bernanke shows publicly. The monetary
response episode late in 2008 of an extra $1 trillion is clear.
The USFed has pumped in $500 billion in the last three full months.
Something is going on, something big! Witness a panic by the
bankers in charge. They cannot blame it on QE2. The fingerprints
of the massive recent injection has little if anything to do with
QE2, which would show up in the last half of 2010. The USFed is
freaking out from what it sees happening. They are monetizing USTBonds
and mortgage bonds of many types with abandon again. They might
be buying up Interest Rate Swaps, those scummy contracts that attract
little public attention, even though they fasten together the USTreasury
complex from the short end to long end with a gigantic hidden corset.
All is not well behind the curtains. See the Silver Doctors article
(CLICK HERE).
Be sure to know that the commodity market responds to the gradual
and sudden ruination of the USDollar. What the myopic Chairman Bernanke
believes is free usage of the Printing Pre$$ has a tremendous impact
on the entire cost structure as well as a highly damaging effect
on the USDollar integrity. He is burning the USDollar in a bonfire
of failure laced with vanity. And certainly, the prestige of the
USFed is greatly undermined.

VEILED QUANTITATIVE EASING BY USFED FOREVER

◄$$$ THE USFED HAS PURCHASED 83% OF USGOVT DEBT SINCE QE2
BEGAN. HOWEVER, THAT IS A CONSERVATIVE FIGURE. PRIMARY DEALERS ARE
OFTEN REIMBURSED WITHIN ONE MONTH BY THE USFED IN OPEN MARKET OPERATIONS
TO COVER THE REST OF THE 100%. THE DEALERS WORK IN NON-COMPETITIVE
BIDS TOO. WITNESS WEIMAR AMERICA. THE USFED IS ISOLATED
AS THE MAIN BUYER OF USGOVT DEBT. THE USTREASURY MARKET HAS BEEN
WRECKED. $$$

The USFed has served as the source for 83.4% of USTreasury cash
requirements since the start of the second round of QE. Since
the launch of the USS QEII ship of fiat state in November, the USDept
Treasury has issued a gross $890 billion in debt in the form of
various Bond, Bill and TIPS (the supposed inflation protected bonds).
These the funds the USGovt received in exchange for promises to
pay interest and principal at maturity on securities. Over the past
five months, another $291 billion in debt maturity was paid down,
to redeem principal to the fortunate on USGovt debt at maturity.
The remainder $589 billion in debt was issued between November 1st
and March 31st, essential funds for the ongoing operations of the
United States.
This is from public data. Each auction is with a breakdown of Direct,
Indirect, and Primary Dealer takedowns. They are proclaimed as resounding
successes, one and all, the public is led to believe. Internal distortions
are stark. The stated Bid/Cover ratios over 2.0 are not legitimate.
The Primary Dealers act as USFed intermediaries, not for distribution
of USTBonds to private sector investors like pension funds, but
rather for a quick turnaround to the USFed (almost in secret) for
reimbursement in open market operations. Any Bid/Cover ratio
under 2.0 is a failed auction. Less known is that the true deals
in USTreasurys occur in the secondary market, or that dominated
by the US Federal Reserve. Primary Dealers promptly flip bonds
purchased during a primary auction right back to the USFed.
In so doing they corrupt the auction results as they complete the
debt monetization loop at almost 100%. Since the start of QE2, the
Federal Reserve has purchased $491 billion of Treasurys in the Open
Market, plus another $556 billion since the start of QE Lite.

Therefore to sum it up, out of $589 billion in net issuance,
the USFed has been responsible for 83.4% of the money needed to
fund government transfer payments. In the months April through
June, the USFed will fund at minimum another $400 billion in USGovt
cash needs for operations, bureaucracies, entitlements, and war.
To put the budget battle into perspective, the USCongress squabbled
over a government shutdown due to a $30 billion discrepancy on the
two sides, the amount the USFed monetizes in one single week. Who
are what will step in to provide this 83.4% of ongoing cash needs
($100 billion per month) when the debt monetizing controlled avalanche
ends on June 30th? Any sudden halt to the debt monetization machinery
would result in a rapid disintegration of the USTBond Carry Trade
that the big US banks have grown dependent
upon. The USFed will obviously be forced to fill the vacuum,
and continue the Quantitative Easing programs, even if in secret.
They will not tolerate the ruin of financial institutions in the
US that rely on borrowing
at short rates and lending at long rates. The big US banks have acted more like hedge funds since
Lehman Brother will killed. The central bank withdrawal from the
inflation factor floor would cause a sudden second insolvency of
the US banking system. So obviously
QE to Infinity Forever!! An asterisk on average maturity of the
$1.33 trillion in USTreasury holdings on the USFed balance sheet.
Maturity has declined consistently in the last eight months ago,
from over 80 months to under 67 months. They are converting to short
dated securities from long dated maturities rapidly, seizing the
moment. It will be under five years (60 months) by end June. Therefore,
do NOT expect any USFed rate hike, since they would torpedo their
own balance sheets that have gone to shorter maturities. This
is so plain to see. So disregard the propaganda about USFed hikes
to ward off price inflation or to confirm the USEconomic recovery.
It is all nonsense. See the Zero Hedge article (CLICK HERE).

Some details on a typical POMO open market shell game. The Primary
Dealers flip their bonds to conceal the USFed monetization.
The integrity of the bond system has been turned into a farce play
on stage, nay a Weimar Tragedy. On April 4th, the USFed monetized
50% of Primary Dealer bidded bonds from a 7-year auction conducted
on March 30th. The biggest CUSIP marking monetized on record was
QB9, of which the USFed purchased $5.99 billion from a total $8.03
billion. In all, the USFed bought back 50% of the $12.115 billion
the Primary Dealer took down, marked by QB9. The quick coverage
was the fastest episode of bonds flipped on record. Over the
last five years, the USFed has bought between 50% and 70% of all
auctions, a proportion that gradually rises. Furthermore, a key
point on price. These are non-competitive bids submitted by the
Primary Dealers. They accept the average price among their pack,
unlike the competitive bidders who put in a priced bid. See the
Zero Hedge article (CLICK HERE).

◄$$$ USFED MONETIZATION WILL CONTINUE. THE QE2 WILL GRADUALLY
BECOME MELDED WITHIN THEIR REGULAR MONETARY POLICY. THE FOUR BIGGEST
DOMESTIC REASONS FOR CONSTANT QUANTITATIVE EASING ARE 1) ABSENCE
OF USTREAUSURY BOND BUYERS, 2) THE GARGANTUAN USGOVT DEFICITS, 3)
THE WRECKED HOUSING MARKET, AND 4) THE BLOAT OF PROPERTY RELATED
TOXIC ASSETS ON THE BANK BOOKS. THEN ADD ON THE FOREIGN POLICY IN
OPPOSITION TO THE CANCEROUS PROPAGATION FROM THE USFED. AS EVIDENCE
OF THE CANCER, NOTICE THE MARGINAL BENEFIT OF NEW DEBT. IT IS LONG
PAST SATURATION, WHERE PRICE INFLATION HAS NO MORE RESISTANCE. $$$

Debt monetization will continue, all claims of testing the
financial system without training wheels being total deceptive rubbish
and colorful bravado. Next, as Jim Rickards of Omnis indicated
a month ago, the vast engines of Quantitative Easing will slide
into the center rails of policy. Talk will slowly turn to
not requiring it, a grand deception among many, as the debt monetization
on a huge scale paid for my freshly printed free money will morph
into regular policy, but more hidden from view and from the statistics.
Thus the bankers in charge of the nation will attempt to get away
with monetary murder of the USDollar. They will not succeed. The
principal thread of systemic failure in any semi-closed system like
a national economy is its currency. The USDollar has a bad case
of rampaging cancer. If QE is withdrawn in any substantial sense,
the USEconomy will contract rapidly, broadly, noticeably. Nothing
is ready to pick up the USTBond demand, since the industrial base
is carved and shipped away to Asia, the asset
ATM units (home equity) are declining again, and the retail mall
machine has badly stal led.

The United States
has run out of assets to pump, cannot lean on its factories, and
faces a scourge of cost inflation. After its high profile
failure, the vast inflation factory of Wall Street has yielded control
to the Printing Pre$$ factory in the USFed basement. The
QE engines from the inflation factory are all that remains, tragically.
They will NOT be turned off. Talk of their idling will be the next
big lie in a vast betrayal of the US
citizens. China
is often mentioned as keeping their workers busy, even if building
ghost cities. The USGovt must next be concerned about keeping their
workers busy. Efforts have failed. Worse, the QE game played
by the USFed has challenged foreign central banks to resist a unified
policy led by the Americans, using tremendous antagonism and
caustic interactions. See Germany and the Euro Central Bank rate hike, and
China
with its greater tightening. The USFed is soon to be isolated. See
the Zero Hedge article (CLICK HERE).

The futility of QE lies not only in its ruinous isolation of the
USTBond market, but also in the lack of potential benefit in the
USEconomy. The nation is saturated in debt. New debt extended cannot
achieve traction. The debt has local sources for cars, homes, and
credit card usages, even shopping sprees. Keep this chart in mind
when US bank leaders talk about
extending credit to the big US banks and to consumers, even to government.
It is not succeeding!! Debt and inflation are all they know. They
are architects of failure. The United
States faces a systemic failure, whose climax
will be a USTreasury Bond default. Expect it to come in the form
of a grand debt restructure, maybe forged at a global summit. It
could happen within the next two years, maybe sooner. Watch the
Bretton Woods summit planned for the new IMF global reserve currency,
another elite circle jerk. The forum might later be used to forge
the USTBond debt restructure.

◄$$$ THE USFED IS STILL BUSTED. THE RECENT LESS OBVIOUS EXPANSION
TO THEIR BALANCE SHEET IS FROM THE COMMERCIAL REAL ESTATE SECTOR.
THEY ARE RESCUING THE MORTGAGE BACKED BOND MARKET IN QUIET FASHION,
IN HEAVY VOLUME. DESPITE A COMEDOWN, THE PROPERTY MARKET PRICES
ARE BEING SUSPENDED HIGHER THAN REALITY DICTATES. $$$

As the USFed with seeming stealth grew its balance sheet to
around $2.75 trillion, it conducted a shadow bailout of residential
real estate and commercial real estate. The commercial market
has been the silent beneficiary lately of central bank largesse.
They have bought its toxic bonds in heavy volume. Commercial real
estate (CRE) values have plunged $3 trillion from their peak in
2008. While residential real estate values peaked in 2006, CRE paused
two years before falling rapidly. The quick move down in price occurred
because the regional banks held firm onto $trillions of CRE loans
to form its vacuum. The properties have in many cases lost half
their value. The wreckage includes hotels with low occupancy, empty
shopping centers, and multi-use projects (condominiums & shops)
lacking demand. Little is ever mentioned about this $3 trillion
commercial industry that is benefitting just as much from USFed
largesse and balance sheet expansion as the well known residential
side. The CRE sector has been bailed out without the knowledge
of the public, not by a Congressional TARP decree, but by the USFed.
That allowed the big US
banks to conduct their Extend & Pretend charade in a massive
float of insolvent red ink. The mark to market accounting was suspended,
enabling many institutions to roll over CRE debt, enabling also
the borrowers to renew loans even if they currently are non-paying.
The banks pretending that they will eventually be repaid, a grand
coverup.

The residential home loan holders are not given that same opportunity
to refinance in rollover. The USFed has in the process permitted
the entire CRE market to be suspended in midair at fictional prices.
In late 2009 it was clear to the USFed and the USDept Treasury
that the $1.2 trillion in commercial loans maturing between 2010
and 2013 would cause thousands of bank failures if the existing
regulations were enforced. The USDept Treasury interceded with
a rules change. New tax rules adopted by the IRS indirectly aiding
the big US banks, allowing commercial loans that were part of investment
pools known as Real Estate Mortgage Investment Conduits, or REMICs,
to be refinanced without triggering tax penalties for investors.
The USFed continues to purchase mortgage backed securities, expanding
its balance sheet constantly at peak. The CRE bond market lacks
demand for real estate in all forms. So in yet another market, the
central bank is really the only buyer. The CRE bond market is
in its third of five years for high volume maturity. The strains
are happening in force. The property market and the bond market
are all wrecked. As the cost squeeze filters through the USEconomy,
consumers will pull back even more. The shopping malls and commercial
centers will face even more blight from the reduced cash flows.
The strain on capital is growing more acute.

◄$$$ THE STRAIN FROM COMMERCIAL REAL ESTATE WILL BE THE NEXT
IMPORTANT BURNING LOG ON THE USFED BONFIRE. IT IS SOAKED WITH KEROSENE
FROM EXTEND & PRETEND ACCOUNTING. NUMEROUS ARE THE THREATS TO
BANKS, BUT WITH MATURITIES IN HIGH GEAR, THE DAMAGE TO BANKS WILL
BE GREAT. A SLOWER USECONOMY FROM THE COST SQUEEZE ASSURES MORE
SUDDEN LOSSES ON THE COMMERCIAL SIDE OF THE LEDGER. $$$

Political capital has been exhausted on bank bailouts for their
toxic credit portfolios. The CRE bond market will have to stand
on its own, default broadly, or be bailed out by the USFed. In taking
on the duty, the USFed subjects itself to even more insolvency risk.
Direct bailouts for failed luxury hotel projects or empty shopping
malls that catered to a wealthy class will not fly. No more tolerance
exists. So the USFed accepted their ruined bonds on the quiet. The
commercial real estate market provides the shopping marts for the
great consumption extravaganza that is coming to a painful tragic
end. Its wisdom was found in the same as a Jack Daniels bottle of
whisky. Feel bad? Go shopping. Maxxed out on credit cards? Use a
new offered card. Just buy a home? Fill it with furniture right
away. Want to impress that gal? Treat her to diamonds. Feel impotent
in midlife? Buy a boat and some viagra. The debt ridden American
public carries a debt burden on its income capacity, which is strained
and faltering. The folly filled engine of the USEconomy, the consumption
class, has entered another critical contraction governed by rising
food & gasoline costs. Banks internally know problems are occurring,
and have responded with a reduction in credit. Check the MIT chart
on contracting commercial loans being made.

Too little demand is realized for new commercial sector projects.
The entire monetary strategy that leads the stimulus strategy is
flawed. The inflationary environment engineered by the Secretary
of Inflation at the giant inflation factory known as the august
USFed is intended to cover the national debts across the bond spectrum.
Inflation as the solution will not succeed, as the USTBond
and USDollar will be ruined in the process. Their policy
actions merely postpone the day of reckoning, while accelerating
the capital destruction. The problem is not lack of credit but rather
that incomes are lacking and the USEconomy remains grotesquely out
of balance. The massive hidden CRE bailout is never mentioned in
the broadcast media, the publication media, or the radio media.
It is part of the grand process to bail out banks by allowing them
to continue to keep toxic ruined loans on their books, while using
current bailout funds to speculate in the USTreasury carry trade
in order to rebuild their balance sheets. The extreme cost is borne
by the working and middle class of this country, who have seen the
entire cost structure rise as a consequence. The CRE market had
a peak national value of $6.5 trillion three years ago. Its current
value stands at an $3.5 trillion, except that it benefits from the
widespread Extend & Pretend practice which maintains artificially
elevated prices. Banks have not come to terms with those unrealized
losses. So the CRE market might be properly valud at a cool $1.0
to $1.5 trillion less!! See the MyBudget360 article (CLICK HERE).

HOUSING NOT TO RIDE INFLATION WAVE

◄$$$ THE DETAILS OF COMMERCIAL PROPERTY ARE WOEFUL. ITS DECLINE
HAS BEEN WORSE THAN RESIDENTIAL, YET COMMERCIAL LOSSES TO THE BANKS
HAVE NOT OCCURRED IN GREAT VOLUME YET. THEY ARE ASSURED SINCE VAST
AIR POCKETS SUPPORT THE NICHE MARKET ON BANK BOOKS. VACANCIES AND
DELINQUENCIES ARE RAMPANT, WHILE COLLATERAL IS GROSSLY INADEQUATE
TO SUPPORT THE LOANS WITH TIME EXTENSIONS. $$$

The US Federal Reserve is tasked with bank oversight, to make sure
their loans are properly valued through adequate collateral. Commercial
loans have been modified across the board, unlike the residential
market, which sees foreclosures rather than generous term extensions.
The plan was to amend the terms so that the commercial borrower
could avoid an impossible refinance of the strained loan. The banks
hoped to be made whole later when conditions improved. They have
not improved. The USFed coerced the banks to do what they called
troubled debt restructurings, which involved modifying an existing
loan by making favorable changes to the terms or breaking the loan
into pieces. One part is healthy and properly collateralized,
the other a veritable piece of toxic sludge resting on a bank shelf
jar. Spokesmen for the USFed trot before the USCongress to paint
unrealistic pictures that present grand distortions. They claim
the worst is over for the CRE market. From 2008 through 3Q2010,
commercial banks had incurred only about $80 billion of losses from
commercial real estate exposure. The losses should be five times
that much, at least.

The regulators who preside over banks, thrifts, and credit unions
quietly gave lenders flexibility in how they classified distressed
commercial mortgages. Banks were able to separate distressed loans
into performing and non-performing portions, and institutions were
able to reduce the total reserves set aside for non-performing loans.
The regional banks parked those reserves at the USFed, earning
interest, but more importantly, thus concealing the USFed insolvency.
The SEC is suddenly openly worried that banks are covering up losses,
when they were involved in encouraging the coverup of such losses.
Tragically, $billion in commercial loans are currently in distress
because tenants are dropping like flies in the scorching hot sun.
And the cost squeeze has only just begun. While banks have extended
the terms of the debt with more interest reserves, the loans continue
to be classified as performing, but the values of the collateral
property behind these loans has fallen 43% with alarm bells ringing.
The loans should never have been extended in the first place. The
borrowers are grossly upside down with much lower collateral than
loan balances. According to Trepp LLC, a data firm specializing
in commercial data, non-performing commercial real estate loans
makes up 72% of the $320 million in non-performing loans reported
by banks in February. These figures are after the extremely
liberal definition of non-performing in the industry. The niche
market is a wreck.

The details on the commercial real estate (CRE) market are abysmal.
The loan portfolios is mired in deep toxic swill, soon to come into
the open in the form of writedown losses. The cost squeeze will
only make the following ugly statistics much worse, as the USEconomy
slows further.

The vacancy rate for office space in the US is currently 16.5%

The vacancy rate for industrial space in the US is currently 14.2%

The vacancy rate for retail space in the US is currently 13.0%

The delinquency rate within collateralized debt obligations
in CRE loans rose to 14.6% in February. The increase signals a
trend of higher delinquencies in the bond segment.

Moodys reports CRE prices are down 4.3% from a year ago and
down 43% from the peak in 2007

The delinquency rate on loans packaged and sold in commercial
mortgage backed securities rose to a record 9.2% in February,
according to Moodys

Regional and local community banks have as much as 80% of their
balance sheets tied up in commercial real estate, without income
to offset any fresh CRE losses.

◄$$$ HOME LOAN DELINQUENCIES CONTINUE UNABATED. NO RECOVERY
ANYWHERE IN SIGHT. EVEN LOWER HOME PRICES ARE COMING, A STRONG MOVE
DOWN AGAIN. THE PIPELINE IS SLOWING DOWN A LITTLE ON HOME FORECLOSURES,
WHICH APPEAR TO BE LEVELING OFF. $$$

LPS Applied Analytics has provided a snapshot of the delinquency
picture. Overall mortgage delinquencies (DQ) declined slightly in
February, but the pipeline is still heavy. The DQ rate resumed the
decline after an increase in January while foreclosure inventories
remain stable, slightly below the historic highs set a year ago.
Delinquencies continue to improve as new problem loan rates decline
and loan cure rates increase. Foreclosure start declines and
foreclosure suspensions are reducing the upward pressure on inventories
caused by the moratoriums that have been instituted on foreclosures
and sales. To be sure, an enormous backlog of foreclosures still
exists with overhang at every level. Details are ugly.

2.49 million loans under 90 days delinquent

2.16 million loans 90+ days delinquent

2.2 million loans in the foreclosure process

3 times the number of loans over 90+ days delinquent versus
foreclosure starts

3 times the number foreclosure starts versus foreclosure sales

Foreclosure inventory is over 30 times monthly foreclosure sale
volume.

This graph below shows percentage of homes in delinquency, in foreclosure,
and in non-current mortgages. By non-current is meant late, not
on time, but not yet 90 days late. According to LPS, the DQ rate
is 8.80% of mortgages (down from 8.90% in January), and another
4.15% are in the foreclosure process for a total of 12.96%.
The volume in FC process has not changed much from 4.16% since January.
The national total comes to 6.86 million loans delinquent or in
foreclosure. A large slice of these DQ and FC homes will end up
as bank inventory within the Shadow Inventory bulge bloat. It appears
that the foreclosure process is soon to level off finally. But
the home price effect will be staggering since so pentup and collected,
ready to release from the accumulated inventory within bank books.
See the Calculated Risk article (CLICK HERE)
for other graphs like the breakdown of serious deliquencies.

◄$$$ THE HOUSING MARKET BLUES ARE BACK IN FORCE, SOON TO
BECOME EXTREME ENOUGH TO GATHER NATIONAL ATTENTION AWAY FROM THE
CORRUPT CLOWNS IN THE USCONGRESS STRUGGLING ON A BUDGET AND DEBT
LIMIT. THEY STILL WILL NOT TOUCH THE WAR MACHINE EXCEPT WITH A FEATHER.
THE USGOVT PROGRAMS TO AID HOMEOWNERS HAS BEEN A TOTAL SHAM. CRISIS
BUILDS. THE PANIC WILL SHOW VERY SOON ON BANKERS. $$$

The bleeding continues on both homeowner equity and bank credit
portfolios. The USFed bond purchasing program (QE2) has been
an utter failure. Recall its secondary purpose was to support housing
prices. Not happening. Staggering liquidity sloshes around in
the financial markets, but primarily to replace absent USTBond buyers
and to lift the stock market. The bankers do not want the stock
market to accurately reflect the powerful recession in the USEconomy.
Housing prices have resumed the descent unmistakably. The crisis
is coming back fast & furious. It never went away. Bernanke
purchased $1.7 trillion in toxic mortgage backed securities (MBS)
to prevent the big US banks from suffering major losses. They are
more worthless with each passing month. The Paulson Fed steered
$700 billion of TARP Funds into the same big US
banks, redeeming deeply damaged assets of many stripes at nearly
100%. It was a sham. However, despite all the official initiatives
nothing was restructured or fixed. The housing market continues
down. The mortgage bonds continue to lose value rapidly. The
HAMP and HOPE programs are a joke, useful for propaganda and nothing
more. The cramdown initiatives (forced lower home loan balances)
were mostly bluster. Homeowner defiance from loan payment scoffing
will soon blossom like the spring azalias, jonquils, and daffadils.

More crisis comes. In fact, the number of sides to the crisis is
growing. The management of the crisis will soon be recognized
as an impossibility, whose epicenter remains the housing and mortgage
finance markets. My September 2008 forecast of an eventual USTreasury
Bond default is moving closer to reality. The last ditch efforts
of home loan reductions is the next sham movement. The volume of
money devoted to loan modification is laughable. Bank of America
has made strides in this direction, too late and way too little.
A $700 million grant to California
from the USDept Treasury is also a drop in the bucket. The size
of the aid packages to reduce home loan balances must be over $2
trillion to make a difference. That will never happen.

According to Bloomberg News, "Residential real estate
prices dropped in January by the most in more than a year, raising
the risk that US home sales will keep slowing. The S&P/Case-Shiller
index of property values in 20 cities fell 3.1% from January 2010,
the biggest year-over-year decrease since December 2009. Rising
foreclosures are swelling the number of houses on the market,
which may put additional pressure on prices in coming months. At
the same time, a further decline in home values may keep potential
buyers on the sidelines, as they foresee better deals, hurting
construction and consumer spending as owner equity evaporates. Foreclosure
filings may climb about 20% in 2011, reaching a peak for the housing
crisis, according to RealtyTrac Inc. The median price of existing
homes, which make up more than 95% of the market, slid 5.2% from
a year earlier, erasing all gains made after February 2002, according
to the National Assn of Realtors." According to Case-Schiller,
housing prices are now off by 31.4% from their peak, but the widely
watched index is conservative in my opinion on measuring the price
decline. The housing sales have really turned down hard, both existing
and new. The housing market is a total wreck. The bankers with USGovt
help and Fannie Mae centrifugal participation, built a many headed
monster in a housing bubble. Witness the predictable widespread
wreckage from its reversal, fully forecasted since 2005 in the Hat
Trick Letter. Wall Street made $trillions, committed fraud, and
still is in control of the USDollar finance ministry. The crisis
is building toward a new crescendo.

The Bernanke Fed is lost. They focus quietly on the vanished foreign
creditors from the USTreasury market. They focus secretly on the
S&P stock index with their daily lifts at 10am and 3pm. They
focus openly in mild desperation to rescue the housing market with
indirect aid through the mortgage bonds. Curiously, the mortgage
bond situation has separated from the housing inventory problem,
now two distinct black hole centers of crisis. The public has
begun to experience widespread shock. They react by withdrawing
from home purchase, figuring correctly that a cheaper price comes
later. They react by scoffing at mortgage payments to banks they
regard as criminal acting with impunity. Bernanke is looking lost
and confused, but tries to put a confident front before the matting
crowds in the legislature. A detachment between the financial markets
in stocks & bonds has taken place. Price inflation is fast rising,
moving toward 10% in our real world, while the long-term USTBond
yield fights around 4%. It is controlled by JPMorgan with Interest
Rate Swap contracts even as the USFed monetizes $100 billion per
month. The USEconomic recession builds force. Corporate profits
suffer from the cost squeeze, while the S&P500 stock index marches
higher. It is controlled by the Working Group for Financial Markets
(aka Plunge Protection Team), no longer hidden, so that the stock
index itself retains a near constant value after USDollar devaluation
steadily. Watch the bankers show their panic in the next few months.

◄$$$ CBS 60 MINUTES HAS PUBLICIZED THE ABSENT LOGIC OF PAYING
FOR A MORTGAGE WHEN DEEPLY INSOLVENT. IT MAKES NO SENSE TO CONTINUE
MAKING PAYMENTS ON A HOME LOAN WHEN THE LOAN BALANCE GREATLY EXCEEDS
THE HOME VALUE, ESPECIALLY WHEN SO MUCH BANK FRAUD IS INVOLVED WITH
THE ASSOCIATED BONDS AND CONTRACTS. EXPECT A BIG RISE IN DEFIANCE,
WITH LOAN SCOFFING BY THE 11.1 MILLION UNDERWATER MORTGAGE HOLDERS.
CIVIL DISOBEDIENCE HAS MET A BILLBOARD TO GUIDE DEFIANT BEHAVIOR.
PUBLIC ANGER DIRECTED AT BANKS IS HUGE. $$$

The highly popular 60 Minutes show was aired on a topic widely
called Fraudclosure, the contract fraud practices within the mortgage
foreclosure process. Expect a public reaction steeped in defiance.
The people are angry, and to date have had difficulty in appropriately
directing their anger. Expect hundreds of thousands to scoff at
banks when as homeowners they are badly underwater on their home
loans. They see huge USGovt aid going to big US banks caught
in bond fraud and foreclosure fraud but without prosecution. A curious
analysis was performed on the shoulders of JPMorgan's analyst Michael
Feroli. It can be quantified that the total volume of unpaid
mortgages already defiant to their bankers is $50 billion per year,
equal to 0.4% of GDP nationally. They simply squat in their
own homes, awaiting bank action for delinquency. Many people figure
they can escape the consequences for several months when just not
paying anymore. The banks are often frozen in inaction themselves
since foreclosure and short sale would result in a huge bank loss.
Many banks are overwhelmed with foreclosures and have inadequate
staff. Given the heavy volume of home loans in such status, banks
are slow to react naturally. They are swamped, and in no rush to
book a heavy loss case by case. Consider the public reaction
to the popular television show, a horrendous exposure of widespread
unchecked contract fraud that has not been legally addressed.
This has come after multi-$trillion mortgage fraud in the bond market
on top of the contract fraud at the grassroots level, with consequences
finally to the cost structure as the world punishes the USDollar
for the big US bank sins!!

Expect the scoffing of home loan payments from distressed homeowners,
whether employed or not, to increase sharply. It would be a surprise
if 12 to 18 months from now, that the volume on unpaid defiant mortgages
had not reached $100 billion per year. The lesson taught is that
paying mortgages when down & out is for suckers. Nationally
there are 48 million mortgage borrower making payments, and 11.1
million underwater mortgages among them. They will be one step
closer to throwing in the towel on feeding the mortgage monster,
that great appendage to the financial crime syndicate in power.
The public has been given a demonstration on a mechanism to strike
back. The Jackass does not advocate illegal or improper action,
but it should be expected. The pipeline is ripe and loaded for future
foreclosures and home loss. A hefty 4.6 million mortgages are currently
delinquent over 30 days. The potential for future scoffing among
them is tremendous, and could actually work perversely to put
more money in consumers hands. Bear in mind that the bank
industry is actually considering a voluntary settlement package
to work its way from under the legal penalty of their comprehensive
fraud. They are considering a $20 billion settlement deal, including
grants to homeowners, aid for legal counsel, and more. Any such
gratuity to wiggle out of legal liability should be $1 trillion
minimum, not a trifling $20 billion. The amount even pales against
the potential of $100 billion in scoffed mortgage bills. See the
Zero Hedge article (CLICK HERE).

The civil disobedience movement was first mentioned in the Hat
Trick Letter several months ago. Its potential for systemic
disruption was ripe. It has grown enough to qualify as being of
critical mass. The refusal to pay on home loans, if done by a big
enough slice of the nation's inhabitants, can be a very powerful
action by the public to force a policy change, even a systemic change.
It can be a radical disruptive social response. The entire credit
dependent system could fold if a sufficient proportion of the population
defied the banks on home loans, car loans, and credit cards, the
backbone of the debt structure. The big US
banks could retaliate by limiting cash dispensed at ATM machines.
Expect it. The Jackass would never advocate such behavior, but theoretically
it could result in magnificent and unexpected changes, emergency
meetings by bank leaders, and major concessions toward true restructure,
like home loan balance reductions in a broad manner.

◄$$$ HOME BUILDERS ARE BEING CRUSHED BY FALLING HOME PRICES,
SHORT SALES, AND FORECLOSURE SALES. HOUSING DEVELOPMENT PROJECTS
ARE CUTTING BACK. ON THE OTHER SIDE, LENDING INSTITUTIONS MUST LAY
OFF WORKERS IN THE LOAN PROCESSING CENTERS. BOTH ENDS ARE IN RUINS.
$$$

The competition between home builders and the heavily discounted
sales from home foreclosures is fierce. The advantage of home builders
is a structure free of damage, but with a certain number of niggling
little initial problems from completion of the construction project.
The banks are having a horrible time discriminating which properties
are ready to sell, even at big losses, since so many are damaged,
sabotaged, even vandalized. Some banks have yet to fully examine
what is on their REO books of homes in inventory. The home builders
across the board are facing profit slowdowns. Some have been processing
large project liquidations, even from other builders. Some have
been processing loans to Fannie Mae, as reported in past reports,
in portfolio arbitrage processing conducted with FDIC blessing for
big bank benefit. As the home prices fall on a national level
far below construction costs, my forecast, any home builder will
be very fortunate to remain in business. My forecast is for
existing home prices to descend to a 20% or 30% discount below construction
costs. The competition is fierce.

New home sales are at the lowest level in almost 50 years, having
to compete against foreclosure sales. Home construction in the United States is coming to
a virtual halt, almost the lowest in modern history. Sales of new
homes plunged in February to an annual rate of 250 thousand, the
third straight monthly drop. New home sales are just half the
pace of 1963, despite 120 million greater US
population. Small homebuilders are due soon to shut down. The
median price of a new home is down to $202k, the lowest since 2003.
The surge in foreclosures is forcing down prices for existing homes
even faster than for new homes. New homes are becoming less attractive
to buyers on a price basis. New homes have accounted for a mere
5% of all sales this year, a sharp decline from the typical rate
of nearly 15%. Only 183 thousand new homes were available for sale
in February, the smallest inventory supply in four decades. Builders
have scaled back on new development projects, breaking ground on
about 40% of normal volume. It is just plain cheaper to buy an existing
home, many of which are selling below the seller's home equity.
See the Tennessean article (CLICK HERE).

On the other side of the housing industry lies the lenders. Apart
from their corruption in the bond market and the foreclosure document
arena, they have business centers. Many are honestly run, others
not. Basic economic deterioration, job insecurity, slightly rising
mortgage rates, realistic appraisal processes, and tougher lending
standards have conspirred to reduce consumer demand for home loans
and refinancings. Wells Fargo has joined other industry leaders in making
serious job cuts from the loan processor centers and other related
workers. The San Francisco
based bank, the biggest mortgage lender in the nation, has handed
pink slips to about 1900 workers who had processed loans generated
both by their own mortgage unit and by independent brokers. The
notifications went out March 23rd telling affected workers their
jobs would end in 60 days. The refinance volumes have declined by
60% while the prevailing 30-year rates have increased somewhat from
4.21% in October to the 4.93% currently. See the Calculated Risk
article (CLICK HERE).

SCOURGE OF SHADOW INVENTORY

◄$$$ THE SHADOW HOME INVENTORY HELD BY USBANKS DECLINED BY
A SMALL AMOUNT, AS MORE PROPERTIES WENT TO MARKET, COMPLETED AS
SHORT SALES. A WHOPPING NINE MONTHS OF ADDITIONAL INVENTORY SUPPLY
REMAINS IN THE OVERHANG, WITH 2 MILLION MORE HOMES SUFFERING 50%
NEGATIVE EQUITY IN WAIT. $$$

CoreLogic has reported that the deeply damaging Shadow Inventory
(sometimes called pending supply) declined sightly in the last month.
Take no solace, since it still contains almost a year's worth of
supply as a powerful overhang. The invisible inventory (not on Multi-Lists
for realtors) still is very large, but it has reduced a little.
The reason why is liquidations, which is how the market home prices
fall. Homes have begun to hit the market hard. Their graph below
is comprehensive, showing the estimated number of 90+ day delinquencies,
the total home foreclosures, and the bank held REOs (from home foreclosure
seizures) not currently listed for sale. Once listed for sale, a
house is removed from the shadows. CoreLogic reported that the
current residential shadow inventory as of January 2011 declined
to 1.8 million units, representing a nine month supply. The
count is down from 2.0 million units from a year ago. It is still
critically high and being steadily supplied. Homes enter from the
delinquency path, and exit from the short sale path. Be sure to
know that the national statistics never include the shadow inventory
in reported unsold inventory. The shadow supply has a huge flow
still to come from the several million homes in negative equity.
Some details. Of the 1.8 million unit Shadow Inventory supply, 870
thousand units are seriously delinquent (4.2 months supply), 445
thousand are in some stage of foreclosure (2.1 months supply), and
470 thousand are already in REO (2.2 months supply). In addition
to the current Shadow Inventory supply, roughly 2 million loans
strained by at least 50% negative equity will likely enter this
shadow supply in the near future. See the Calculated Risk article
(CLICK HERE).

◄$$$ THE SHADOW INVENTORY IS PROOF POSITIVE OF ANOTHER 20%
DECLINE IN HOUSING PRICES IN THE USECONOMY, WHICH WILL RESULT IN
CONTINUED DAMAGE FOR CONSUMER SPENDING POWER, FOR CORPORATE EXPANSION
CAPABILITY, AND FOR BANK INSOLVENCY. HUGE PRESSURE FOR SYSTEMIC
FAILURE LURKS IN ALL CORNERS OF THE USECONOMY. THE MASSIVE COST
SQUEEZE HAS BEGUN, AND WILL INTENSIFY. $$$

The US
housing market is destined to decline another two years or more,
and suffer at least a 20% price decline, well below construction
costs. A national disaster is in mid-course, nowhere near completion,
sufficient to cause systemic failure and an inflationary depression.
The housing reliance for economic growth in the United States from 2002 to
2006 was deeply rooted in asset bubbles, a house built on shifting
unstable sands covered by a fraud-ridden finance cloud. The downside
would ordinarily be very deadly to any economy. But the US
shipped off much of its manufacturing base to China,
seeking low-cost solutions in a truly suicidal mass movement directed
by corporate chieftains, as part of a grand treaty with China. They received Most Favored Nation status.
They received huge foreign direct investment, like $23 billion from
the US &
Canada in 2002 alone. They
promised to recycle their anticipated outsized trade surpluses into
USTreasury Bonds. But the kicker was secret, a key part of the deal.
The Wall Street bankers took on lease a huge hoard of Mao Tse Tung
Gold & Silver, to be returned by 2005. The US
broke the deal, betrayed China,
and earned their great anger. That is a main reason why the Chinese
are motivated to pursue the Gold & Silver bullion market, to
diversify their reserve holdings out of the USDollar, and to foment
a global movement to provide an alternative reserve currency in
the Yuan.

Back to housing. The downside to the housing bust has caused damage
to the USEconomy, leading it into an unending recession. It has
not ended. Worse, the lack of industrial capacity goes hand in
hand with inadequate income from factory workers, always a key mainstay
in any healthy economy. Thus the USEconomy cannot find its footing
through industry during the decline, which should gather momentum
into a catastrophic episode. The USEconomy is so imbalanced
that its absent factory foundation will very likely enable a systemic
failure. My forecast is for growing chaos and accelerating deterioration.
Capital is burning from obscene monetary inflation. To think an
entire national economy could derive a constant stream of income
from an inflating asset like housing was utterly insane, not just
reckless. It actually motivated in great part the launch of the
Hat Trick Letter to warn Americans of a deadly trap that would unfold.
The national response to the housing bust has been a colossal display
of banker corruption and steered banker welfare from the USCongress,
complete with extreme heavy handed power maneuvers by Goldman Sachs
out of the commandeered USDept Treasury. The result has been failure
in restructure, zero meaningful liquidations to the insolvent pillars
in the banking industry, no prosecutions for bank and bond fraud,
and a climax of monetary inflation to cover the USGovt debt in monetization,
together with large rafts of mortgage bonds. Global anger and revolt
resulted. Hence the systemic burst of cost inflation without matching
higher wages. A massive squeeze has begun, very evident by later
this year.

Hints of recovery will come like glittering stones in a vacant
abandoned weeded lot. Expect the low-cost discounters like Wal-Mart
and Costco to post some good sales reports, maybe even decent earnings.
The people will seek discounts with eagerness turning to desperate
motivation. The displaced upper class will turn to the discount
stores. People will turn down the winter thermostats. They will
turn up the summer air conditioner temperature settings. They will
scale down their meat consumption. They will give up going to restaurants
for the most part. Their entertainment budgets will be slashed.
Difficult tradeoffs will be made to survive. The decision to stop
paying the banks for monthly mortgages will be the basis of a populist
uprising. Think in terms of massive shortages, social unrest, civil
strife, class warfare, great dislocations, millions out of work,
countless without homes, mortgage scoffing turned rebellious, rampant
corporate shutdowns, widespread debt default, city & state debt
defaults, and ultimately a USGovt debt default with restructure.
Sadly, the policy decisions by the USFed and USGovt finance ministry
has been to permit powerful price inflation, if not hyper-inflation,
since it is considered more favorable to a deflationary collapse
and exploding interest rates.

◄$$$ A BIG PARADOX FACES THE INFLATION ENGINEERS. THE HOUSING
MARKET IS SET TO DECLINE HARDER AS THE USFED KEEPS PRESSURE ON THE
MONETARY EXPANSION FROM QE2 AND THE NEXT QE3. THEY PURSUE INFLATION
OF ASSETS, BUT CAN ONLY MANAGE TO LIFT STOCKS AND FARMLAND, OBVIOUSLY
OUTRAGED BY A COMMODITY PRICE LIFT. THE BIG USBANKS ARE VULNERABLE
TO THE NEXT PHASE DOWN IN HOUSING PRICES. ONE BIG USBANK IS LIKELY
TO FAIL. HOME PRICES WILL FALL MORE. $$$

If the entire story were told, the inflation engineers are often
directed by the oil industry on both foreign policy and monetary
policy. The inside word the Jackass hears is that President Obama
and numerous high ranking syndicate players have $billion investments
in green renewable energy companies. They want a $150 crude oil
price in order to kick into a higher gear their fledgling industry
stuck in first gear. That is correct, Obama is a billionaire already,
a byproduct of the rewards that came from being a selected (not
elected) president with strong past allegiance to the CIA. Narcotics
funds go a long way in not only keeping the big US banks running, but also
in rewarding the syndicate chieftains. The leading narco barons
have personal net worths exceeding $1 trillion. They purchase nations
with their money, south of the Central American borders. Details
will not be shared, since dangerous information. The Jackass chooses
to forget.

Back to the housing market, and the perverse effect on home prices
during the next phase. The rising wave of price inflation will
not lift housing, whose market is totally wrecked. A home is a financial
asset appendage with a debt millstone, not a hard asset. The
market is beleaguered by a Shadow Inventory outlined in some detail.
The current situation is entirely unique, gone global, since debt
has saturated the Western world for more than a full generation.
Real estate is not a tangible asset, but rather a toxic leveraged
financial asset governed by the non-callable homeowner futures contract
(mortgage). Its queer futures contract features the ability of the
homeowner to abandon, which will happen in droves. The next chapter
will be fascinating to observe, since the many asset classes will
be divided up or down, on the effect from powerful inflationary
pressures. The Deflationist clowns are incapable to discern which
rise or fall. Pure tangible assets will rise and rise and rise,
seemingly without end, since they are not encumbered by debt.
The other debt related assets will continue to be crushed from basic
debt default and liquidation. The price gains for farmland, crude
oil, energy deposits, mine fields, and precious metal bullion have
been and will continue to be astonishing, being pure assets without
adulteration. Commodity related stocks are a difficult class to
judge. Some will soar if not burdened by debt or heavy stock dilution
to cover costs, not to mention jurisdictional confiscation. Others
will languish. Many such stocks unfortunately are shorted by the
hedge funds, some such activity funded by Barrick Gold. Recall that
Barrick has two Boards of Directors, one being a mega-political
agency Who's Who, including a narco baron.

The debate by the nitwits focused on Deflation will become amusing,
as they will continue to be blind in ability to differentiate. For
three years, they have yet to comprehend the complexity of the monetary
hyper-inflation and its ravaging effects. They are like simpletons
in the corner vying for attention, not noticing the strong winds,
compounded by their own flatullence. In several months, the USEconomy
should see some Cost Push with widespread end product price hikes
but also some limited wage increases. But the cost push will mainly
be in rising end product prices and service prices. The bankers
and USGovt officials (puppets controlled by big bankers) will try
hard to prevent wage increases, since their plan is Western slavery.
THE ENTIRE COST STRUCTURE IS RISING, AND WILL SLOWLY KILL THE USECONOMY,
VERY SLOWLY, unless wages are permitted to rise. My forecast is
for wages not to rise much at all. A broad episode of systemic
price inflation that included wage gains, uniformly applied across
the USEconomy would force long-term interest rates up, trigger a
credit derivative explosion centered in Interest Rate Swaps, and
deliver a rapid death to the big US banks. So they prefer recession
without adequate wage gains, which they call secondary effects in
arrogant elitist terms. With millions out of work, the labor market
will not see much rise in wages, except for pockets of specialties.
With inflation, since it is primarily cost structure in its basis,
the result will be massive inflationary recession, later turning
into an inflationary depression. The Jackass foresees inflation
and deflation working to create a massive even greater storm leading
to ruin. For a more complete slam essay against the clueless wrong-footed
hack Deflationists with considerable detail, check the Gold-Eagle
article entitled "Deflationist & Blind Eyes"
(CLICK HERE). Rick
Ackerman was singled out for his arrogant shallow arguments weakened
by blindness, delivered with no recognition of a past string of
erroneous expectations.

The list of REO bank owned properties will continue to rise in
a seeming never-ending fever for the bank executives, bond holders,
and stock holders. The Shadow Inventory of bank held homes will
become a cancer in every sense of the word, sufficient to keep the
housing market in a persistent decline, and keep the banks deeply
insolvent, even push them over the edge toward outright failure.
At least one big US bank will fail before mid-2012, my forecast.
Yet its failure will be disguised as an important restructure, like
Citigroup dividing its many parts in a reversal of its insurance
business. As the cost squeeze continues to render great harm to
businesses and households, the businesses will make job cuts while
the consumers will purchase less in a vicious cycle. The squeeze
will be on working capital, which must pay the commodity tax imposed
by the USFed in highly visible fashion from its debt monetization.
Monetary hyper-inflation carries a heavy cost. The job cuts will
result in further home loan delinquencies and foreclosures, more
more home loan scoffing on payments. The people will simply not
receive sufficient wage increases to compensate for the grand cost
rise. The housing market will continue down in a deadly slow bleed.

The resulting economic nightmare will send home prices down
another 20%, which will confuse the hell out of American economists.
They will be too busy denying any price inflation in the midst of
hyper-inflation. They will be too distracted by what they perceive
as economic growth, which is actually price inflation unrecognized.
Very little will rise in price that is wanted. Even farmland, in
a powerful rise, will become a problem, since marginal acreage going
into production must pay for the amortized cost of the newly bought
land. Stocks will rise, but only to the extent that the USDollar
loses value, in a net zero result. Eventually the resumed housing
decline will force the big US banks to appeal
for more bailouts from the USGovt. They will not be able to cover
up the next round of heavy portfolio losses. They are already insolvent,
and soon to be more deeply insolvent. Even the highest high priest
Alan Greenspan realizes the next phase down in housing will cripple
the big US banks, since as he points out, since many homes are on
the edge of going insolvent, owing more on loans than the homes
are worth. Millions more citizens will go into negative equity.

INFLATION MONSTER SHOWS ITSELF

◄$$$ ENERGY PRICES (LIKE FOOD) ARE A DIRECT REFLECTION OF
MONETARY POLICY AND DO NOT RESPOND TO THE SUPPLY FACTOR. THE GASOLINE
PRICE RISES RELENTLESSLY AND WILL CONTINUE TO DO SO. EXPECT THE
PRICE RISE TO BE RELENTLESS AND TO CONTINUE FOR A LONG TIME WITHOUT
ABATEMENT. $$$

Nobody can escape the fast rising gasoline prices. Hikes occur
often more than once per week. Worse, the present sequence of
months typically has the weakest gasoline demand of the year.
The ramp-up in price is a direct consequence of the USFed monetary
policy. The value of money is declining, so the price of everything
is rising. Gasoline, like food, is very visible. In no way are
the price effects a result of Supply & Demand dynamics for the
product, but rather supply of money. The Cushing Oklahoma facilities
are full to the brim at historic high levels, where the NYMEX light
sweet crude contract is delivered. Their tanks are being bypassed.
Fast rising gasoline prices coincide with the USFed monetary expansion.
Chairman Bernanke intentionally is monetizing USGovt debt, to such
a heightened degreee, that the overflow spillage has hit every single
commodity including the energy products. His asset price initiative
has lifted the stock market but it has also struck the commodity
complex in its entirety. Housing is not an asset being lifted, not
at all. The blunt instruments used by the USFed cannot be aimed,
since they act like a firehose held without a firm grip by the good
chairman. The USEconomy will respond in the usual way, either
with vanished profit margins or higher prices. It cannot withstand
these oil and gasoline prices without a sizeable contraction. Capital
is squeezed, along with consumers. Observe less traffic and fewer
shoppers, but more rage. Great systemic stress has begun and will
intensify. The most visible areas are food and gasoline for the
public. The gasoline price has risen in parabolic fashion, attracting
great attention, the litmus test of failed USFed policy. The
upward trajectory for gasoline will not be subdued until the USFed
Quantitative Easing programs are halted. My forecast is that their
QE programs will be permanent but made more hidden. Prepare for
chaos and crackup.

◄$$$ THE COST PUSH HAS BEGUN TO APPEAR. THE PRICES PAID WITHIN
THE MANUFACTURING CHAIN SHOW A STEADY RISE, BUT WITHOUT MUCH ATTENTION
GIVE TO IT. SUPPLY COSTS ARE BEING PASSED ON. THE MONETARY POLICY
HAS BEGUN TO BACKFIRE IN A VERY PREDICTABLE MANNER. $$$

The recent Institute for Supply Mgmt report showed a cost push
in the Prices Paid component. It went from 82 to 85 but without
notice or fanfare. That is a warning unheeded, very elevated and
with no sign of letting up. Business inventories are also below
normal, which implies that retailers are delaying the re-stock process,
hoping for a lower price later. So supplier costs are rising
when their own inventory replenishment demand is restrained.
New orders are also down from last month. Order backlog is down.
The squeeze has begun on profit margins and it will cause pain very
quickly. Suppliers cannot absorb the higher costs, and vendors cannot
push the suppliers under siege to eat the costs. Inflation expectations
will be soon damaged deeply. The typical billboard message will
be denial followed by admission that nobody could have anticipated
the price inflation monster being unleashed. The Hat Trick Letter
anticipated it completely, but few in the mainstream did. Witness
the toxic fruit of banking and monetary policy, an easy call several
months ago. See the Market Ticker article (CLICK HERE).

◄$$$ PRICE INFLATION HAS ALREADY ARRIVED IN THE USECONOMY.
THE WAL-MART EXECUTIVES AND THEIR FOLLOWERS ARE WELL AWARE. NOTICE
THEY ARE NOT FEATURED ON THE NEWS NETWORKS MUCH. PRICE INFLATION
IS COMING FROM SEVERAL CORNERS (MATERIALS, SUPPLIERS, SHIPPING,
AND FOREIGN EXPORTERS) TO THE USECONOMY. THE MAJOR RETAIL CHAIN
IS THE FLAGSHIP, THE CANARY, THE BILLBOARD. $$$

Wal-Mart is an accurate gauge of the USEconomy, since it is so
large and dominant as a retail chain, the world's biggest. CEO
Bill Simon expects price inflation, serious inflation in his works,
in the months ahead for clothing, food, and other products.
Despite being in a better position than competitors to minimize
the price effects, still Simon expects price inflation to be serious.
He said, "We are seeing cost increases starting to come
through at a pretty rapid rate. We are in a position to use
scale to hold prices lower longer, even in an inflationary environment.
We will have the lowest prices in the market." Some prices
were increased as the company paid for costly store renovations.
The major chain is famous for low prices. When their price structure
rises, then all retailers will have raised theirs too. The modest
price inflation figures promoted by the USGovt propagandists and
Wall Street shills will turn upward, even after their usual gimmicks
to soften through adjustments. The Wal-Mart business incorporates
the cost effects from numerous factors, as suppliers must deal with
higher input material costs. Foreign vendors export their finished
products, largely from 160 Chinese manufacturing plants owned entirely
by Wal-Mart. The higher shipping costs are built in also, passed
along.

John Long is a retail strategist at Kurt Salmon. He believes raw
material costs will be joined by labor costs in China and fuel costs for transportation
globally, to put great pressure on retailers. He predicts prices
will start increasing at all retailers in June. He said, "Every
single retailer has and is paying more for the items they sell,
and retailers will be passing some of these costs along. Except
for fuel costs, US consumers have not seen much in the way of inflation
for almost a decade. So a broad based increase in prices will be
unprecedented in recent memory. [Wal-Mart can mitigate some cost
increases from] access to any factory in any country around the
globe. It is certainly going to have an impact. No retailer
is going to be able to wish this new cost reality away. They are
not going to be able to insulate the consumer 100%." See
the USA Today article (CLICK HERE).

◄$$$ FOOD PRICE INFLATION HAS ARRIVED IN FORCE, IN THE FORM
OF REDUCED PACKAGING. CALL IT CONTAINER SHRINK. VENDORS CAN KEEP
THEIR PRICES FIRM, BUT THE SMALLER SIZE IS EASILY NOTICED. LATER
ON THIS YEAR, THE WIDESPREAD PERCEPTION WILL BE OBVIOUS, AND GIMMICKS
WILL NOT WORK. PERCEPTIONS ARE CHANGING FAST ON PRICE INFLATION.
$$$

Whether potato & corn chips, candy, or vegetables, even restaurant
portions, packages are being reduced so as to maintain the price
per unit. The unit is shrinking, a backdoor maneuver of price inflation
imposition. Food price inflation has been kept somewhat hidden
through the use of smaller packaging. Vendor companies in recent
months have tried to camouflage price increases by selling their
products in smaller packages. The changes are most visible at the
grocery stores and supermarkets, where shoppers pay the same amount,
but buy less. The cases are numerous for the package stories. Bags
of Doritos, Tostitos, and Fritos now hold 20% fewer chips than in
2009. Whole wheat pasta packages have gone from 16 ounces to 13.25
ounces. Many canned vegetables dropped to 14 ounces from 16 ounces.
Baby wipes went to 72 from 80 per box. Sugar sacks are 4 lbs, no
longer 5 lbs. Cans of corn have gone from 16 ounces to 11 ounces.
A can of Chicken of the Sea albacore tuna is 5 ounces, instead of
the former 6 ounce version. Kraft Foods packages for its Nabisco
Premium saltines and Honey Maid grahams each have 15% fewer crackers
than the standard boxes. Procter & Gamble promotes its Future
Friendly products, which use 15% less energy, water, or packaging
than before. They are more environmentally friendly, but they are
also smaller packages. The standard size for Edy ice cream went
from 2 liters to 1.5 liters in 2008, long ago. Tropicana shifted
to a 59-oz carton instead of 64-oz last year, after the cost of
oranges rose. The Jackass has notice at Kentucky Fried Chicken in
Costa Rica, that the chicken
thighs are smaller and the coleslaw cartons in combo meals are a
little smaller. So a swap to domestic restaurant chain has worked
well, where ample servings continue.

At HJ Heinz, prices on ketchup, condiments, sauces, and Ore-Ida
products have already been increased, without apology. Heinz CEO
William Johnson is a straight shooter. He said in March, "I
have never regretted raising prices in the face of significant
cost pressures, since we can always course correct if the outcome
is not as we expected." Where companies cannot change sizes,
like with clothing or appliances, they have warned that prices will
be going up, as the costs of cotton, energy, metals, and other materials
are rising. The effect is sneaky. Comparisons for same sized packages
are no always possible, before and after. The USGovt agencies
will probably skip the adjustment for volume altogether, grateful
for the vendor maneuvers. Gimmicks like greener for the environment,
or handier for carrying, or healthier with fewer calories are common.
But for necessities, such games fall flat. John Gourville is a marketing
professor at Harvard
Business School.
He said, "Consumers are generally more sensitive to changes
in prices than to changes in quantity. And companies try to
do it in such a way that you do not notice, maybe keeping the height
and width the same, but changing the depth so the silhouette of
the package on the shelf looks the same. Or sometimes they add more
air to the chips bag or a scoop in the bottom of the peanut butter
jar so it looks the same size."

Thomas Alexander is a finance professor at Northwood University. He admits that businesses had little choice these days
when confronted with increases in the costs of their raw input supplies.
He said, "Companies only have pricing power when wages are
also increasing, and we are not seeing that right now because of
the high unemployment." Thus the massive squeeze. The bright
side is that overweight Americans could be forced onto a cost driven
diet. With prices for energy and for raw materials like corn, cotton,
and sugar advancing and expected to surge even more later this year,
companies soon will not be capable of concealing the price hikes.
The perceived inflationary effects are slowly becoming obvious.
The smaller packaging is not exactly subtle. They have been shrinking
by noticeable amounts. See the Yahoo Finance article (CLICK HERE).

THE SQUIRMING USECONOMY

◄$$$ USECONOMY IS ALREADY OVER THE CLIFF'S EDGE, LED BY HOUSING.
EARLY IN THE 2000 DECADE, THE ENTIRE USECONOMIC GROWTH MOMENTUM
WAS DERIVED FROM THE HOUSING & MORTGAGE BOOM (ACTUALLY PHONY
BUBBLE). INDUSTRY DEPARTED THE NATION, NOT NEEDED DUE TO THE RELIANCE
UPON THE PROPERTY MARKET WITH ITS CREDIT LEASH. THE CURRENT 2010
DECADE WILL SEE UNINTERRUPTED MOVEMENT TOWARD SYSTEMIC FAILURE,
DRAGGED DOWN BY THE RELENTLESS POWER OF THE FALLING HOUSING MARKET.
SOON HALF THE HOME SALES WILL BE WITHIN THE FORECLOSURE PROCESS.
IF BANKS SOLD THEIR INVENTORY, THE PROPORTION WOULD BE LIKE 70%.
WITNESS A TOTALLY BROKEN MARKET THAT DRAGS THE NATION INTO THE ABYSS.
$$$

Given the very heavy reliance upon the housing & mortgage finance
markets for USEconomic growth, it stands to reason that the down
ramp will be powerful. Its power is amplified by both momentum and
the absence of the industrial sector that largely went to China. So in the void, the national economy faces
the heightened risk of systemic failure. The main engine (home
equity, mortgage bonds) are in strong decline, whose descent is
made much worse by the missing legitimate income from factories
in an industrial base. Worse, US leaders do not comprehend the
entire concept of legitimate income or how to build industry that
creates jobs. They only know household handouts, dumb stimulus,
and bond fraud. The USGovt leadership is a combination of the dumbest
(on economics) and most corrupt (on integrity) in the Western world.
The USEconomy pays the heavy price, along with the US people. Its crippled financial foundation is
already over the edge, facing the nasty specter of another financial
meltdown. No solution, no remedy, no reform, no attempt even at
legitimate business stimulus was made. Thus the risk of a return
to deep crisis is assured. Housing will deliver the blows, echoed
with certainty by the mortgage sector. The banks hold huge shadow
inventories from foreclosure seizures, too many of which have been
vandalized or damaged in non-trivial ways. Two weeks ago, Jim Sinclair
offered details why the nation is already way over the edge right
and why gold is going much higher in price. Here are some important
items selected from his post. He wrote,"You must realize
that the economic and political damage is already done. You must
realize that the mountain of OTC derivative paper is not going
away. You must realize that this means the mountain of OTC derivative weapons of mass financial destruction can only grow.
You must realize that it is not whether or not QE will continue,
it is what it already has done to the Western economies that
much higher gold prices will reflect. You must realize the monumental
change in the Middle East is NOT positive for
the West in any manner, shape or form. You must realize that
it is the currency that breaks, not the country." The
USDollar is destined to render relentless
ruinous harm to the USEconomy and US
people.

The alarm bells are ringing. Systemic failure awaits. The USGovt
is on a fiscal path towards insolvency, matched by grotesque insolvency
in the banking system, in home equity, and in absent industry. Policymakers
are at a critical tipping point, facing runaway deficits and no
way to finance them except from hyper-inflation on a monetary press.
It is merely a matter of when the insolvency catches up to the nation
in its financial standing. The USFed with its ready Printing Pre$$
can do only so much. When it converts into a fixed policy machine,
the credibility of the USTreasury Bond and its USDollar marking
become subject to attacks, since integrity has gone. And confidence
is extremely critical, the linchpin, in a fiat faith based system
of currency. Confidence and prestige in the US Federal Reserve have
vanished during the successive phases of Quantitative Easing, more
of which will come despite denials.

The impetus for that precise push over the cliff could easily
come from the housing market, even while the banks hide their
toxic paper tethered to real estate. For a description of cliff
dynamics, consider comments by John Williams of Shadow Govt Statistics.
In his latest report, Williams says, "Both existing and
new home sales moved sharply lower in February 2011, down 9.6% and
16.9% on a monthly basis. Foreclosure activity remained an intensifying
distorting factor for home sales, with Distressed activity accounting
for an estimated 39% of existing sales in the National Assn
of Realtor's February reporting, the highest portion seen since
Spring 2009, and up from 37% in January. [Look for an] intensifying
double-dip recession and a rapidly escalating inflation problem."If 4 out of every 10 homes sold are foreclosures, then that
market is surely fractured and broken! A record one million homes
were foreclosed by the banks in 2010, and another record breaking
year in 2011 is a certainty given the expired clunker home program,
err the tax credit program. The housing market serves as a massive
wet blanket on the USEconomy attempting any recovery. It more accurately
is a two-ton millstone around its neck, as the USGovt corrupted
clowns fiddle over miniscule budget cuts. The Ryan Budget Plan has
substance, with $4 trillion in cuts, is worth watching. The leaders
operate near the cliff's edge. Remember that protection for both
individuals and corporations is best taken in the form of defensive
measures against the twin threats of the USTreasury Bond and the
USDollar. Each faces ruin with staggering consequences. The
former is careening out of control with a flood of supply and artificial
demand. The latter is descending into a Banana Republic status with
its twin lapel pins being fraud and war. The following graph is
downright scary, thanks to the Shadow Stats folks. The share of
home sales from foreclosures is almost at 40%. It would be above
70% if the banks actually tried to sell what they hold on their
balance sheets at mythical exaggerated value. See the USA Watchdog
article (CLICK HERE).

◄$$$ THE USECONOMY MOVED TOWARD A FINANCIAL SECTOR DOMINANCE
IN THE LAST THREE DECADES. THE RESULT HAS BEEN A PROFOUND LOSS OF
WEALTH AND INCOME CAPACITY. WITNESS THE BITTER FRUIT OF INFLATION
MISMANAGEMENT. US
CITIZENS HAVE BECOME MORE DEBT RIDDEN IN RECENT YEARS. PERSONAL
INCOME DECLINED IN JANUARY EVEN WITH THE SUBSTANTIAL BENEFIT FROM
CHANGES TO F.I.C.A. TAX WITHOLDINGS. $$$

The Chinese economist was correct when he said the USEconomy is
only $7 trillion in activity if one strips out the worthless destructive
financial sector and its many branches. Financial engineering is
destructive of capital, jobs, income, and investments. The American
standard of living, and the national course, changed paths in the
early 1980 decade. A temporary lift came in the Reagan cold war
boom years in the 1980 decade. Inflation ate away most of the wage
gains, which in my view are falsely portrayed in national statistics.
Too little inflation is adjusted and removed from wages, too little
to reflect the reality of heavy price inflation and its erosion.
A clear line of demarcation is evident at the end of the 1970. The
nation shifted from a manufacturing and production to a financial
and service based society. Whether through the lens of GDP, debt,
income, saving, or consumption, a notable decline in national financial
health is obvious, since the 1980 decade. Wealth continues to
decline. See the Zero Hedge article (CLICK HERE).

Real Median Household Income, which is calculated using the spurious
government sponsored CPI, has not grown in 14 years. That means
it has fallen in the world of reality in which we live. Since the
tech telecom bust of 2000, incomes have fallen hard, worse when
proper inflation adjustments are made. For instance, the official
CPI reports a 2.5% to 3.0% CPI nowadays, when the Shadow Govt Statistics
report a 9% CPI that is rising.

Furthermore, the average US family household net worth declined 23% between
2007 and 2009, according to the venerable US Federal Reserve. A
rare survey by them of US households, initially performed in 2007
but repeated in 2009 in order to measure the effects of the recession,
was titled "Surveying the Aftermath of the Storm."It concluded the median net worth of households fell from $125k
in 2007 to $96k in 2009. The 2008 financial crisis resulted
in the vaporization of $trillions in household wealth, primarily
extended from home equity value declines. The numbers paint a stark
picture. Families that owned stock portfolios saw them lose more
than one third in value, from $18.5k to $12.0k on average. Families
took on more debt, running up total debt levels to $75.6k from $70.3k
in median. Median household income declined to $49.8k from $50.1k
per year.

In February, personal income increased $38.1 billion (=0.3%) while
disposable personal income increased $36.0 billion (=0.3%). This
according to the Bureau of Economic Analysis. In January, personal
income increased $147.4 billion (=1.2%) while DPI increased $92.0
billion (=0.8%), as food & energy costs mounted to make an impact.
Bear in mind that January pocket money in households was significantly
boosted by the tax changes for FICA, the Social Security Tax that
is not deductible. The benefit to individuals flows directly to
the federal deficit. But real disposable income decreased 0.1%
in February, in contrast to an increase of 0.5% in January.
That means inflation adjusted income. Put aside that the adjustment
is not adequate, and simply make comparisons. So money available
to spend for households fell despite the one-time gift from the
liberal FICA grant. The end result is still a loss in purchasing
power. The January change in personal contributions for government
social insurance reflected the Tax Relief, Unemployment Insurance
Reauthorization & Job Creation Act of 2010, which temporarily
decreased the social security contribution rate for employees and
self-employed workers by 2.0% for 2011, an effect of $105.4 billion
in January.

Rather than reform oppressive federal regulations, or cut the war
spending, or encourage a return of the factories, they gave yet
another handout that was overwhelmed by the rising food & energy
costs which resulted from two full years of $trillion subsidies
to the fraud-ridden broken unfixable big US banks. What a travesty!
The USGovt specializes in meaningless fleeting handouts. A quick
comment on the $105.4 billion change in tax receipts in one month.
The Congressional Budget Office estimated the FICA benefit to add
$400 billion to the deficit for the full year. One cannot extrapolate
the figure to twelve full months. The USGovt might be in for over
half a $trillion on the FICA grant to households. The nitwits in
the USCongress are arguing forcefully and deliberately over peanuts
in a mere $60 or $100 billion in spending cuts. They have gone so
far as to propose $65 billion in defense budget cuts, a drop in
the depleted uranium bucket, which will be compensated by two months
worth of narcotics profits. Furthermore, recall that January is
not a typical month, since so many annual bonuses are paid out in
the first month. See the payroll withholding tax chart from last
month, with January high outliers.

◄$$$ GOVERNMENT WORKERS DOMINATE BY 2:1 THE MANUFACTURING
INDUSTRY IN THE UNITED STATES, A TOTAL REVERSAL FROM 50 YEARS AGO.
THE GROTESQUE IMBALANCES FROM FINANCIAL FACTORS HAS A CORRESPONDING
IMBALANCE IN INDUSTRY. THE BIG GROWTH IN THE GOVT SECTOR GOES HAND
IN HAND WITH INEFFICIENCY, BLOCKED COMPETITION, AND JOB SECURITY
(OFTEN FOR LIFE). $$$

In the last 50 years, tremendous distortions have been built into
the USEconomy. The legitimate income producing sector of manufacturing
has seen over a 35% reduction since its peak in 1980. The so-called
clean financial revolution turned out to be a ticking time bomb
that largely destroyed the national economy, turning the nation
into an insolvent land. The government sector jobs have tripled
in 50 years, hardly a healthy sign. Today nearly twice as many
people work for some part of the government (22.5 million) than
in all of manufacturing (11.5 million), almost the exact reversal
of the situation in 1960. At that time, 15 million workers plied
their trade in manufacturing and 8.7 million performed a service
for the government. The perspective worsens. More Americans now
work for the government than work in construction, farming, fishing,
forestry, manufacturing, mining, and utilities combined. We have
moved decisively from a nation of makers and tradesmen to a nation
of takers and bureaucrats. Not surprisingly, many states and cities
cannot maintain their solvency, and are in unrecoverable debt.

California, with the highest budget deficit in the history of all states,
has an incredible 2.4 million government employees on the payroll,
twice as many as in manufacturing. New Jersey has a 2.4 to 1 ratio of government employees to manufacturing.
The ratio in Florida is
over 3 to 1. The New York
ratio is also over 3 to 1. The state of New
Mexico wins the prize with more than six government workers for
every manufacturing worker. The numbers are truly staggering. In
New York for instance,
the financial sector employs roughly 670 thousand people. That is
less than half of the state's 1.48 million government employees.
In recent years only government agencies have been hiring, and better
yet, they offer near lifetime security. People regard such things
as attractive in a rotten economic climate. They would rather work
at the Dept of Motor Vehicles, than in making cars. They would rather
issue orders for workplace safety than actually work in a factory.
To be sure, some of the employment trends can be explained by the
benefits of productivity improvements in such traditional industries
as farming, manufacturing, and telecommunications. These produce
far more output per worker than in the past. Today's farmers produce
at least three times more output than in 1950.

The productivity decline is painfully evident in government functions.
From 1970 to 2005, school spending per student adjusted for inflation
has doubled, but at the same time standardized achievement test
scores were flat. Over that same time period, public school employment
doubled per student, according to a study by researchers at the
University of Washington. This is rampant
negative productivity. Consider mass transit. Its agencies spend
more every year and yet a much smaller share of Americans use trains
and buses than in past decades. The private sector has companies
spur productivity by releasing under-performing employees and rewarding
excellence. In government employment, in high schools and even in
universities, tenure shields workers from this basic system of reward
and punishment. The teachers and civil servants enjoy near lifetime
employment with security in a system that tends to breed mediocrity.
Competitive contracts are a non-entity in many government functions,
often stifling cost containment. Unions have blocked a great many
efforts. See the Wall Street Journal article (CLICK HERE).

◄$$$ JOB GROWTH DURING THE SUPPOSED USECONOMIC RECOVERY IS
ANEMIC AT BEST, AND MYTHICAL AT WORST. A GROWING NUMBER OF PEOPLE
ARE BEING REMOVED FROM THE WORK FORCE, THUS GENERATING SOME FAVORABLE
STATISTICS. HENCE THE BILLBOARD PROPAGANDA DEPENDS UPON HOUSEHOLD
FAILURE FOR FAVORABLE STATISTICAL EVIDENCE. THE SIMPLEST STATISTICS
MEASURES ARE THE MOST ACCURATE, AND THEY INDICATE THE ONGOING RECESSION
IS ELIMINATING JOBS STILL. $$$

If every single discouraged job-seeking jobless worker would only
quit looking for work, the US
unemployment rate would go to 0% and the US leaders could campaign on a grand success!!
Let's look at the reality. The labor market statistics grow worse
in a festering manner as the years pass, a reflection of the housing
market. The USEconomy in 2007 had 146 million workers employed,
or 63% of the working age population. In early 2011, only 139.9
million workers are employed, or 58.5% of the working age population.
Over this time frame, an additional 7.1 million Americans entered
the working age population. That is great movement in reverse
during a supposed recovery. In 2007 a ripe 26.3 million Americans
were on food stamps, or 8.6% of the total US population. Now a higher
44.2 million Americans are on food stamps, or 14.3% of the US population. This is the
bitter fruit of a chronic engrained economic recession, whose disaster
is called in pure Orwellian style a recovery. Let's trot out that
often shown comparative chart of job growth from the recesion nadir,
its low point. One can see that almost no recovery at all has occurred,
and the job losses continue. Debt saturation and busted asset bubbles
have wrecked much damage, while bank leaders seek to promote the
final asset bubble, USTreasury Bonds. The USGovt claims fewer job
losses than before, when in reality more people are falling completely
out of the job market and not counted any longer. Witness a repeat
of the Great Depression in modern terms.

The recent March Jobs Report made the argument that 216,000 jobs
were added, trumpeted proof of a recovering USEconomy. Balderdash,
bullocks, and bull cookies! The unemployment rate fell to 8.8%,
down from 9.8% in April 2010, made possible by 2.8 million Americans
who left the labor force. Hardly a success note. Focus on the
labor Participation Rate, that handy device produced by the Clinton
Admin, where the roots of statistical deception can be traced easily.
They oversaw the Decade of Stolen Prosperity. The percentage
of Americans in the labor force at 64.2% is the lowest since 1983.
The employment to population ratio of 58.5% is also the lowest since
1983. These obscenely horrendous labor figures are the bitter fruit
of a falsely reported USEconomic recovery after 18 months. The weekly
unemployment claims remain steady around the 390 thousand level.
Games continue with revisions of the previous weeks so that the
next data release can be called a reduction. Games continue to changes
to the seasonal adjustment process so that a desired result can
be reported.

The percentage of the American working population in the workforce
consistently ranged between 66% and 67% from 1998 through 2008.
The current situation is 2% below the norm. The true jobless rate
is over 22%, a figure defended by the Shadow Govt Stats folks. Counting
the discouraged workers, a more meaningful unemployment rate is
closer to 17%. The jobless proportion of the population (in black)
gives a more accurate reading on the labor market, free of chicanery
and gimmickry. For a better perspective, consider that the nation
has only 1.8 million more people employed than at the depths of
this Greater Depression. The working age population has grown by
3.2 million people since 2009. However, the civilian workforce has
declined by 736 thousand over this same period of time. In the
graph below, notice the drop in the Jobless Rate (in red) comes
at the direct expense of the Participation Rate (in blue). The
Obama Admin leans on the theory that people are returning to school,
seeking training, raising children with a parent at home, and depending
upon their working spouse who thrives. They say some decide finally
to retire. This is all propaganda and weak kneed lies. All respected
studies reveal that Boomers have not saved enough to retire and
will be forced to work into their 70′s and beyond.

◄$$$ THE FOOD STAMP PROGRAM HAS CREPT UP TO YET ANOTHER RECORD
OF POOR AMERICAN PARTICIPANTS. THE NATION STEPS CLOSER TO THE THIRD
WORLD. THE SWOLLEN RANKS OF PEOPLE IN NEED OF SUBSISTENCE AID HAS
GROWN BY 22% IN THE LAST 2-1/2 YEARS SINCE THE RECESSION SUPPOSEDLY
ENDED. $$$

More Americans dropped below the poverty level threshold last month,
a count measured at 105 thousand people. The total Food Stamp
program participation in January hit an all time record 44,187,831
according to the USDept Agriculture. The average monthly benefit
on a per person and per household basis, has been in decline for
two years straight. The benefit from which to buy food is at the
lowest level since April 2009. A fast growing number of Americans
are living on government subsistence, as they receive the lowest
aid since 2009, equal to $133 per month. And worse still, with
rising food prices, that monthly stipend does not go as far as it
used to, not to mention gasoline prices. An all-time high of
44.2 million Americans and 20.7 million households are in the food
stamp program. This is 14.3% of the American population and 18%
of all the households. Since the mythical end of the economic recession
in late 2009, the number of people added to the Food Stamp rolls
has increased by 8 million, equal to 22% of the national population.
The annual cost for this program will reach $70 billion this
year, up from $33 billion in 2007. The data makes liars of all
those who claim an economic recovery. Consider it the echo from
the housing market wreckage, which is also not in recovery.